South Africa’s tax agency has warned digital asset holders and VASPs who have been defaulting on their taxes that they will soon face its wrath.
The South African Revenue Service (SARS) called on all exchanges, wallets, and other VASPs to register their businesses within the grace period it has provided before embarking on an enforcement campaign.
“We’ve invited taxpayers, exchanges and other intermediaries to register, because now, if you don’t register, you’re breaking the law,” SARS Commissioner Edward Kieswetter told Bloomberg.
“Once they have registered, we now have knowledge of their existence, and we can now begin to track their business activities.”
South Africa is one of the largest digital asset markets in Africa, competing for the crown with Nigeria. According to SARS data, nearly six million residents hold digital assets. A separate study by Consensys found that two-thirds of South Africans had purchased digital assets at some point, but only 20% still held them as of last year.
The adoption of digital assets has gone beyond speculation. The Financial Sector Conduct Authority (FSCA) projected last month that Decentralized Finance (DeFi) users will hit 378,000 this year. A significant portion of this has gone to payments, with services like Centbee setting the standard for Bitcoin payments at thousands of merchants.
This vast market is among the sectors in which the government seeks to boost revenues. While Kieswetter noted that most VASPs have been compliant and that retail holders are increasingly paying their taxes, he believes more can be done, but it won’t be achieved overnight.
“It’s a multi-pronged attack, but I think it’s going to take some time before we get completely on top of it,” he stated.
Other governments in Africa are also ramping up digital asset taxation. In the 2023-24 financial year, Kenya reportedly collected 10 billion shillings ($78 million) from the sector, with the tax agency setting a $466 million target for the current year.
Nigeria is also pursuing VASPs that have operated carefree for years. It recently slapped Binance with a $81.5 billion lawsuit, with $2 billion being for back taxes that the exchange has avoided for years. The West African nation is also pushing to change the law, allowing the tax agency to better target the digital currency sector.
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