SARS has confirmed its compliance radar is focused on both High-Wealth Individuals and taxpayers engaging in cryptocurrency related transactions for the next fiscal year! Both taxpayer segments have been a recurring collection windfall for the tax man and have once more made it onto the “Compliance Themes” to maximise revenue collection, per SARS’ Revenue Announcement for the 2024/2025 Fiscal Year.

SARS cited other “focus areas to guide our work”, including debt cash collections, outstanding returns collections and international taxes.

Excerpt from the SARS Revenue Announcement presentation on 01 April 2025

Having a clear goal in mind, the revenue authority’s “Compliance Themes” are primed to eradicate non-compliance at all levels, and across all taxpayer segments!

HWIs: Increased Scrutiny on International Tax Affairs

In the world of tax, High Wealth Individuals (HWIs) are known for accruing their wealth through navigation of complex, multi-layered investment structures, both locally and offshore. Countering these complexities, SARS’ recent announcements confirm that the collection focus on HWIs is intensifying, aided by the use of automation and capitalising on data driven insights to enhance efficiency and accuracy in the detection of tax non-compliance.

Through its modernisation, SARS has significantly bolstered its capabilities to monitor and address the tax affairs of HWIs, casting its collection net as wide as possible and enabling swift “risk detection”.

To mitigate these tax risks, SARS assigned to the wealthy, dedicated relationship managers, who are responsible for keeping a close eye on their wards’ tax affairs.

Through its enhanced surveillance, data-sharing mechanisms, and processing automations, SARS can now detect these offshore assets and ensure they are fully declared. Statistically, the confirmed revenue performance from this segment of society is recorded at R11,76-billion in the last fiscal year. If you think SARS is willing to let that number diminish, you would be sorely mistaken.

This proactive approach not only ensures compliance but also helps in the accurate assessment of tax liabilities, thereby reducing the risk of legal repercussions for the taxpayer.

Cryptocurrency – Compliance and Collections

With crypto asset transactions taking a central role in the agency’s “Tax Gap Themes” for the current fiscal year, SARS is keen to plug any potential tax gaps. In a broader context, this move aligns with global trends aimed at promoting tax transparency across digital and crypto asset markets.

While SARS has yet to issue formal, comprehensive guidance on how taxpayers should disclose their crypto asset transactions, it is evident the revenue authority has taken a zero-tolerance stance on non-disclosure! 

Taxpayers are required to report crypto profits as either capital or revenue, depending on the nature of the transaction. This determination is crucial for correctly calculating and fulfilling one’s tax obligations. Additionally, SARS has signalled its commitment to ramping up compliance enforcement, which includes collaborating with crypto exchanges to monitor and share information, as well as the utilisation of AI, machine learning and specific algorithms to support its enforcement initiatives.

Despite the momentum in crypto compliance, South Africa’s domestic tax legislation on crypto remains somewhat ambiguous, leaving many investors questioning how to interpret and apply the rules. With no comprehensive guidance yet from SARS, this uncertainty presents a challenge for taxpayers attempting to remain compliant.

SARS has however issued numerous clear warnings on criminalising non-compliance, and the ongoing collaboration with crypto exchanges underscores its commitment to addressing this issue. The onus remains on taxpayers to disclose their earnings accurately, with SARS ready to pursue those who neglect their reporting obligations.

Wealth Seeking Missiles Launched

As SARS continues to upgrade its compliance programmes, taxpayers in the wrong can expect their non-compliance to be both hard and costly. 

Beginning a compliance initiative with the end in mind, is something SARS is known for, which may very well be the case here; by ensuring there is full disclosure of all interests, be it in South Africa, offshore, or in the Metaverse.

Conducting 236 Lifestyle Audits in the last fiscal year, gauging if a taxpayer is living beyond their means is now that much less onerous on the revenue authority, and more a case of capitalising on data driven insights.

By staying informed and proactive in their compliance efforts, both HWIs and Cryptocurrency traders / investors can navigate the tax landscape with confidence, contributing their fair due to the tax collection pot.

Where taxpayers find themselves in a potentially precarious position of now disclosing previously undeclared interests, including crypto assets, the best practice is to seek the assistance of a tax professional, ensuring the best compliance strategy is followed. 

However, where a taxpayer has already undertaken the disclosure themselves, and a subsequent audit ensues, enlisting seasoned tax attorneys to help navigate the complex nuances of tax legislation will optimise a taxpayer’s compliance, thus preventing potential prosecution and the loss of “luxury” assets.

Written by Jashwin Baijoo, Associate Director and Head of Strategic Engagement & Compliance at Tax Consulting SA