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As reported by BusinessTech, the National Treasury recently issued a modified regulation for electronic services.
The regulation, which will come into effect on April 1, 2019, will affect international service providers to South African customers, who must now determine whether their service provision is described as an "electronic service" and whether it will create an obligation. VAT registration. in South Africa.
According to Baker & McKenzie, the amended regulations mean that all services provided from abroad by an electronic agent, an electronic communication or the Internet are now electronic services for VAT purposes.
"What the definition contemplates is that the services provided are essentially automated and involve minimal human intervention and can not be guaranteed in the absence of information technology," he said.
"Only a limited number of services that can be provided by the aforementioned means are excluded from the definition of electronic services, namely the regulated educational services in the country of export of the foreign service provider and the telecommunication services."
He added that the scope of the new regulations is staggering and could include the provision of the following services:
- Software Subscription Services
- The use of software by an entity in South Africa provided electronically by its foreign-owned holding company (unless the exclusion applies)
- Diffusion
- cloud computing
- Advertising services
- Thu
- All booking services made via an online platform
What it means for you
Seelan Moonsamy, a VAT expert at Baker & McKenzie, told BusinessTech that the regulations would likely lead companies such as Netflix, Facebook and Google to have to register for VAT.
"If these companies provide their services electronically and the total value of their services exceeds one million rand over a rolling 12-month period, they will have to register."
He added that this additional tax would probably be pbaded on to South African consumers through price increases.
"In the end, the customer will bear the value-added tax in the form of higher prices, because VAT is – in economic terms – a consumption tax," he said.
"I imagine that giants such as Amazon and Google would still remain very competitive on the basis of their ability to charge the rebate, so their likely registration of VAT for e-services would have no major impact on their ability to attract customers and their income. "
Baker & McKenzie warned that all foreign companies that provide electronic services in South Africa should now determine whether their services are provided through an electronic agent, an electronic communication or via the Internet.
"Failure to register for VAT on time could have a huge financial impact on these foreign service providers because SARS would impose penalties and interest, which could also damage the reputation." , did he declare.
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