[3 January 2022]
In a public notice dated December 10, 2021, the South African Revenue Service (SARS) specified the required information for tax invoices on electronic service transactions.
[18 March 2019]
The Ministry of Finance has updated the Electronic Services Regulations 2014. These changes will be implemented on April 1st, 2019.
Amendments to the Electronic Services Regulations 2014
[16 April 2014]
A Treasury press release clarifies the upcoming registration process for foreign suppliers of electronic services (e-services) starting April 7th, 2014.
Here are the key points:
- Scope Reduced: Feedback from draft regulations indicated overly broad coverage, including business-to-business services. To simplify implementation, the initial regulations will exclude certain e-services. However, VAT on imported services not in the regulations still applies under the Value Added Tax Act.
- Not a New Tax: The regulations shift the VAT responsibility from the service importer to the foreign supplier. This aims to improve compliance and create a level playing field for local and foreign e-service providers.
- Simplified Registration: SARS plans a streamlined registration and administration process to minimize burdens on businesses. Notably, foreign suppliers won’t need a South African bank account.
- Registration Threshold Review: The Treasury and SARS are considering raising the registration threshold for foreign e-service suppliers to avoid impacting very small businesses.
An article in Business Day notes further:
“An issue that raised concerns was the concept of someone doing an electronic course via a foreign university having to pay VAT while someone attending a South African university would not.
Piet Nel, project director for tax at the South African Institute of Chartered Accountants, said on Friday the assurance was given that registered entities would be excluded.
Another concern was the low R50,000 threshold set for the registration for VAT by foreign suppliers. Mr Nel said this affected several “business-to-business” transactions where a company which imported software for its own use would have to register.
The Treasury said it was aware of the issue and was reviewing the threshold with the South African Revenue Service.
“An increase in the registration threshold for foreign-based electronic service suppliers will be considered to ensure that very small electronic service suppliers are not unduly impacted,” the Treasury said. It said the regulation changed the tax liability from the importer to the foreign supplier, to address concerns about non-compliance and level the playing field between local suppliers of e-services and foreign suppliers.
SizweNtsalubaGobodo tax services head Zweli Mabhoza expressed concerns about the implementation of the amended legislation.
He said it was not clear how the amendment would be enforced if suppliers did not register for VAT.
It was also not clear how smaller foreign suppliers would know there had been legislative changes in SA.
The services affected by the amendment to the VAT act include the supply of educational services if a service provider is not regulated by an educational authority in the “export country” (where the service comes from).
The affected electronic services also include games and games of chance, internet-based auction facilities and the supply of e-books and audio visual content.”
[6 April 2014]
National Treasury has implemented a 14% Value-Added Tax (VAT) on all digital goods and services, including those purchased from companies outside of South Africa. These new regulations are outlined in the Electronic Service Regulations 2014.
Originally planned for April 1st, 2014, the VAT application will now take effect on June 1st, 2014. This means you’ll start paying VAT on services like:
- Educational courses online
- Digital games (including those involving chance)
- Online auctions
- E-books, music, movies, and other downloadable content
- Subscriptions to digital services
For a complete list of affected services, please refer to the detailed regulations.