Paying for service in USD

[intengu]

Hello,

Please kindly advise on the following:

I have a business account with Nedbank and pay for a service in USD (monthly or yearly) 13.15 (R/$) what are my actual costs in terms of currency conversion:
13.15 + what other costs?

Is the above a cost effective solution?

What are the implication with respect to VAT since I am a VAT vendor?

In order to provide a stable price to my customers what could you suggest with our currency fluctuations.

 

[Praemon]

Hello,

Please kindly advise on the following:

I have a business account with Nedbank and pay for a service in USD (monthly or yearly) 13.15 (R/$) what are my actual costs in terms of currency conversion:
13.15 + what other costs?

Is the above a cost effective solution?

What are the implication with respect to VAT since I am a VAT vendor?

In order to provide a stable price to my customers what could you suggest with our currency fluctuations.

How are you paying for it? With a credit card? You'll then need to add on any fees associated with paying with credit card and foreign currency, which is normally around a 2%-3% commission fee. The exchange rate also won't be great, but you can get an idea from the rates on the Nedbank website: https://nedbank.co.za/content/nedbank/desktop/gt/en/personal/forex/forex-rates.html ("Bank Sell").

You won't pay VAT on the payment/receipt of the service, assuming it's a taxable service/product (otherwise you have to pay VAT on receipt of the service). When you sell the service/product locally though, you'll need to apply VAT to it then as you would any other service/product.

Currency fluctuations are obviously very high. So you'll need to take that into account, and ether set your pricing high enough to allow for this volatility, or frequently adjust your pricing.

Finally, if these are large payments, you may need exchange control approval, which is around R3k per application.

 

[MagicDude4Eva]

You won't pay VAT on the payment/receipt of the service, assuming it's a taxable service/product (otherwise you have to pay VAT on receipt of the service). When you sell the service/product locally though, you'll need to apply VAT to it then as you would any other service/product.

Careful: SARS has changed the VAT act in 2013 which makes the "import" of electronic services VATable and whatever services you resell might very well fall under those services requiring to be registered for VAT by the 3rd party. I would certainly check this properly with someone who has a deeper understanding of this.

FWIW: You would need to price your local service in such a way to protect yourself from currency fluctuations. You could perhaps leverage "bulk-deals" with the overseas service provider to get discounts which could additionally offset exchange-rate fluctuations.