VAT on digital goods and services in SA from April: Treasury

TJ99

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Amazon, Apple, Blizzard etc are not going to register as a tax paying entity in ZA.

This will ultimately alienate South African consumers from buying goods on the Internet as the above suppliers will simply choose not to service customers in this country.

Bingo.

We were just starting to get access to the world of online distribution with things like Steam, Playstation Network, Xbox Live, iWhatever and Google Play finally enabling us to buy content legally. Now, with this additional hoop jumping, they will just decide that the tiny income they get from us (Ahfrikuh? Y'all gots electricity there?) is not worth it.

Hence my earlier comment, the government is determined to prevent people who want to give their money to content creators, from doing so and turn them into pirates.
 

bekdik

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Amazon, Apple, Blizzard etc are not going to register as a tax paying entity in ZA.

This will ultimately alienate South African consumers from buying goods on the Internet as the above suppliers will simply choose not to service customers in this country. Let's face it, the South African purchases make a very small contribution to these company's bottom lines. They will rather shut us out: "Goods not available in your country", than jump through all the hoops SARS would require to collect the tax revenue.

Exactly that.
 

Praemon

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... If the buyer now have to pay this in future, how is that VAT payment going to be managed by SARS?
Would it depend on voluntary reporting of purchases to SARS, along with VAT payment?

Technically, that's how it currently works, but no one declares and pays VAT on their digital purchases. So it will have to be done another way that takes the onus off the consumer and onto the seller/banking institute. Going to be interesting to see how they achieve that.
 

Jacques

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Denouncer, so SARS is expanding on what's already supposed to be happening for imported services?
(I doubt 1 in a 100 people even know this part of the law)

Part II - Value-Added Tax
7. Imposition of value-added tax
1)Subject to the exemptions, exceptions, deductions and adjustments provided for in this Act, there shall be levied and paid for the benefit of the National Revenue Fund a tax, to be known as the value-added tax-
a)on the supply by any vendor of goods or services supplied by him on or after the commencement date in the course or furtherance of any enterprise carried on by him;
b)on the importation of any goods into the Republic by any person on or after the commencement date; and
c)on the supply of any imported services by any person on or after the commencement date,
calculated at the rate of 14 per cent on the value of the supply concerned or the importation, as the case may be.

2)Except as otherwise provided in this Act, the tax payable in terms of paragraph (a) of subsection (1) shall be paid by the vendor referred to in that paragraph, the tax payable in terms of paragraph (b) of that subsection shall be paid by the person referred to in that paragraph and the tax payable in terms of paragraph (c) of that subsection shall be paid by the recipient of the imported services.

Part II - Value-Added Tax
14. Collection of value-added tax on imported services, determination of value thereof and exemptions from tax
1)Where tax is payable in terms of section 7(1)(c) in respect of the supply of imported services the recipient shall within 30 days of the date referred to in subsection (2)-
a)furnish the Commissioner with a return; and
b)calculate the tax payable on the value of the imported services at the rate of tax in force on the date of supply of the imported services and pay such tax to the Commissioner :
Provided that where the recipient is a vendor, that vendor must calculate the tax payable on the value of the imported services at the rate of tax in force on the date of supply of the imported services and must furnish the Commissioner with a return reflecting the information required for the purposes of the calculation of the tax in terms of section 14 and pay such tax to the Commissioner in accordance with section 28.

1. Definitions
imported services
means a supply of services that is made by a supplier who is resident or carries on business outside the Republic to a recipient who is a resident of the Republic to the extent that such services are utilized or consumed in the Republic otherwise than for the purpose of making taxable supplies.

(own emphasis added)

Regarding the law applying to companies who operate from outside South Africa, and who does not have an agent, office or bank account here, I don't see how they would be able to enforce such a law on those foreign companies.

This Internet still seems to be a complicated concept for governments to come to terms with.
 
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sajunky

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So it will have to be done another way that takes the onus off the consumer and onto the seller/banking institute. Going to be interesting to see how they achieve that.
Agreed. I violates basic VAT rule that VAT vendor is reponsible for VAT collection.
SARF=South African Revenue Force
 
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Jacques

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Agreed. I violates basic VAT rule that VAT vendor is reponsible for VAT collection.
SARF=South African Revenue Force

It's more complex. See what I quoted above.

Simple example: If you buy an item on Amazon, and they deliver it to you, you usually have to pick it up at the Post Office, and there the Post Office will ask you to pay the VAT and any other import duties.

In the case of services (and it seems now for electronic goods too) Section 14-1 will most likely apply. The recipient of the service there has the obligation to report and pay the VAT.

Note, I'm not a tax practitioner or a lawyer (if not obvious).
 
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Johnfpro

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If one has access to a foreign credit card or PayPal will do the trick!

I don't think the likes of Amazon are going to change their billing model for a stupid little country like RSA. Their annual turnover probably exceeds our annual GDP.
 

SauRoNZA

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Where does it even refer to international companies or stores?

In my opinion this will only be applicable to companies with pricing in Rands, for instance iTunes SA. I

If you have a US account I don't see this coming in calculation at all, how would they even know you are buying from South Africa if have register an account in Alaska.

And it's not hard to implement, they simply do it the same as every other country where they charge tax. Just change the percentage in this case.
 

Juice

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Is the idea to blanket charge VAT on all international online credit card transactions?? That is really the only way to enforce this, well at the consumer level.

Yeah, that's what I'm worried about. Then they will:

1) have your money
2) force the burden of proving which transactions should not have attracted VAT onto you

This can probably be facilitated quite easily by the banks.

SARS will only be able to charge this 'after the fact' though, since they won't be able to risk inflating the cost of the purchase over your credit limit at the point of sale. They will probably collect this information and then raise a special ITxxx tax return for VAT on foreign purchases, like an IRP5 or something, and then tell you you owe them X Rand in taxes for the year. You will then have to reconcile your actually VAT-able purchases with the ITxxx tax return and claim back those non-VAT-able fees that you are not liable to pay.

I am not sure how they intend to cover PayPal; however, if you consider that you somehow need to convert your Rands into PayPal in the first place, they can probably lump PayPal in with providing a foreign digital service and VAT the entire amount of your deposit. This will still leave the loop-hole of having someone deposit money into your PayPal account and the spending that money again, in which case SARS will know nothing about it.

It may be worth it to investigate an Offshore banking option. Many banks have a virtual branch in places like Guernsey that will allow South Africans to open foreign currency accounts and some may even issue debit/credit cards in those currencies. I don't know if SARS will have jurisdiction on transactions performed by ZA citizens from these banks for digital purchases. Time will tell.
 

Fulcrum29

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Where does it even refer to international companies or stores?

In my opinion this will only be applicable to companies with pricing in Rands, for instance iTunes SA. I

If you have a US account I don't see this coming in calculation at all, how would they even know you are buying from South Africa if have register an account in Alaska.

And it's not hard to implement, they simply do it the same as every other country where they charge tax. Just change the percentage in this case.

In terms of the regulations, the VAT will apply to any supplier of electronic services from an “export country” to any resident in South Africa, or where payment is made from a local bank.

Yes, they already charge their own tax, but they will also need to impose our VAT:

The regulations have been published by Finance Minister Pravin Gordhan for comment, and follow the proposals he made in his 2013 budget speech to impose VAT on foreign businesses who “sell e-books, music and other digital goods and services”.

The regulations are called the Electronic Services Regulations and come into operation on a proposed date of 1 April 2014.

The "export country" entities must then comply with the SA Electronic Services Regulations.
 

SauRoNZA

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Yes but you are missing what I'm saying.

Those "foreign" businesses are ones with a legitimate presence in SA that charge in Rand.


It doesn't apply to the same foreign business which has a US$ price store also accessible to South Africans.

They don't charge any tax on the SA ITunes Store at present, that will simply become +14% from what it is now.

So if you want to dodge this new tax stick to your US iTunes account. Which is what I'm using anyway.
 

Juice

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Sooooo, I read through it. The scary part is this one:

2(2)(b) where any payment to that person in respect of such electronic services originates from a bank registered or authorised in terms of the Banks Act, 1990 (Act No. 94 of 1990).

That's HOW they're going to do it.

So, foreign sellers of services don't have to be registered in SA as a VAT vendor. They'll just catalogue all your transactions moving offshore through one of our local banks. It also implies that if you are paying from a foreign bank, then you will not have to pay VAT; however the regulations are OR, not AND, so if they could, they are legally allowed to and they would.
 

Juice

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Most of these already have some provision for VAT on digital goods as they definitely add VAT for customers in the EU \ UK which is then paid over to the relevant tax authority. It will probably be quite simple for SARS to request use of the same mechanism?

Which raised an interesting question. If you have to pay in-country VAT on your digital purchase, and then SA VAT as well, can you claim back the in-country VAT from the export country (as you would if you were physically buying something in, say, the UK and then claiming the 17% VAT back when you leave the country after your trip)?
 

Fulcrum29

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Yes but you are missing what I'm saying.

Those "foreign" businesses are ones with a legitimate presence in SA that charge in Rand.


It doesn't apply to the same foreign business which has a US$ price store also accessible to South Africans.

They don't charge any tax on the SA ITunes Store at present, that will simply become +14% from what it is now.

So if you want to dodge this new tax stick to your US iTunes account. Which is what I'm using anyway.

So SARS will scrutinise your transactions as your money moved within an SA (local) bank outside SA to the electronic services provider, they will put the onus on you to pay the 14%.
 

Juice

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I think all of your assumptions are spot on. They either try force the seller to charge and pay over the VAT, which will never happen. They force the banks to monitor your transactions and take it directly from your account and pay to SARS, which will never happen. Or they can hope that everyone is honest on their tax returns and add another field saying "Foreign digital purchases during the year (please state the amount in USD)", which will never happen.

Just another law thought out by people completely in the dark and will be pushed through without anyone actually understanding what it is and how it would work...

Uhm, no. This can totally happen. You do know that SARS forces all the banks to report the interest earned on ALL of your accounts directly to SARS every year? When you get an IT3(b) from your bank, SARS gets an exact, automatically submitted copy of the data. Legally. Are you also aware that SARS can debit your outstanding due taxes directly from your bank account, without your permission or authorisation? Ssscchhhlurrrrrp! Now you see it, now you don't.
 
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SauRoNZA

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So SARS will scrutinise your transactions as your money moved within an SA (local) bank outside SA to the electronic services provider, they will put the onus on you to pay the 14%.

I just don't see that happening.

Whatever the regulation provides for and the real world practicality are two very different things.

But we can take bets. This will only apply to shops selling in ZAR with official local support and SA accounts. That's my bet.

Any US/UK/Other accounts available to South Africans will be unaffected.
 
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