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

Juice

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

Since SARS will not be able to force foreign companies to register as VAT Vendors, they'll probably just collect the VAT straight from the payer... It's like when they charge you VAT when you collect your foreign-sourced parcel from the post office, or when you bring something in through the airport and the friendly customs agent waves you over for a chat and a body-cavity search.
 

Juice

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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.

If you have to covert Rands into non-Rands at any point, SARS will be able to scrutinise your transaction. They can argue that PayPal constitutes a digital service for financial intermediation and they'll sommer VAT your transfer into your PayPal account. Using a foreign credit card is probably the best option.
 

Juice

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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.

A company taking money in Rands, locally, will probably be registered as a VAT Vendor (iTunes, Google Apps, XBOX, PlayStation Network, etc) and they will charge you the VAT and then pay it over to SARS.
 

Fulcrum29

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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.

The regulation is now open to public comment:

http://www.treasury.gov.za/comm_media/press/2014/2014013001 - Electronic Services Regulations.pdf

This announcement was made against the backdrop of efforts, both internationally and locally, to bring cross border e-commerce (specifically the digital economy) into the VAT regime. The current application of VAT on imports does not lend itself to the effective enforcement on imported services or e-commerce where no border posts (or parcel delivery agents, e.g. the Post Office) can perform the function as collecting agents, as is the case with physical goods.

The net result is that the local consumers can buy imported digital products without paying VAT. This outcome not only places local suppliers of digital services at a competitive disadvantage (compared to suppliers from abroad) but also results in a loss of revenue for the fiscus.

This is a take on international and local (cross-border) importing operations in regard with digital products and services. Since when is importing limited to the ZAR in regard with this newly proposed regulation?
 

Juice

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Will this cover Netflix and the like?

Yeah, probably either under Miscellaneous Service 8.(b) film or Subscription Service 9.(l) webcast or 9.(m) web site or 9.(p) web series.
 

Paul Hjul

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Arg a double thread:
http://mybroadband.co.za/vb/showthread.php/593523-SA-digital-tax-coming-in-April

@Jacques
my understanding of imported service practice is that it is complied with fully by firms engaged in importing services largely because doing so gets the tax payable reduced - using VAT attracting accounting or legal services in the UK and rather paying VAT here and claiming a refund abroad.

What seems hazy to me is the provision of services attracting VAT in SA and the ability to obtain a refund - which makes SA an unattractive jurisdiction to provide services from.

The difficulty that currently arises for SARS is surely the low value transactions which have a high volume
 

Jacques

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Paul, my reason for quoting that section was more to highlight that the individual already has an obligation to pay VAT for a service (whatever that might mean) from overseas. It would seem that this new regulation it just attempting to make it clearer or more specific. For companies there's other things at stake.

What still puzzles me is that the regulation gives a definition for "electronic services", but that term is not used anywhere in the VAT law from what I could find. So how are they going to link that definition to anything in the law?
 

Paul Hjul

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O agreed fully

my concern is that the understanding of that section is that the individual's obligations arise only in commercial instances - this understanding is on very shaky legal grounds and is more about pragmatism.

I haven't looked at the regs yet but I'd be a lot more comfortable if the regs were designed around helping the individual rather than entrenching the individual obligation premise found in that section. The worry I have is a coercion vicious cycle starting.
 

Paul Hjul

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Original discussion here. http://mybroadband.co.za/vb/showthr...oogle-and-Apple-Online-Stores-in-South-Africa

There are serious issues with this, including exposing either taxpayers, government, or the seller to currency and interest rate risk, as well as SA not actually being involved in the supply chain at all, except for areas that are already taxed. It is an opportunistic tax, and a crap one at that...
Government being opportunistic .... never ....

The big question - and I need to sit down with the regulations carefully - is how VAT already charged in the jurisdiction of the point of sale of the service is going to play out. And on every transaction. For Microsoft and Apple there are savings to be made because our tax levels on consumption is lower but if the attitude is to extract as much water from rocks as possible the country will bleed.
 

Musiclover08

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I really wish tax was actually used for the benefit of the people.
For the comments, what would I send to them as an objection? I remember that someone drafted a template for the e-toll comments, would someone in the know be able to draft a basic template to send to them?
 

DJ...

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Government being opportunistic .... never ....

The big question - and I need to sit down with the regulations carefully - is how VAT already charged in the jurisdiction of the point of sale of the service is going to play out. And on every transaction. For Microsoft and Apple there are savings to be made because our tax levels on consumption is lower but if the attitude is to extract as much water from rocks as possible the country will bleed.

It's most assuredly the latter...
 

Paul Hjul

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It's most assuredly the latter...
with the government of the day - that is definitely the intent

my only reason for seeing this as a Parson's egg situation is that I have more confidence in the finance cluster's understanding of reality that trade and industries and this is a global challenge

I also see an opportunity to get the import and export of services VAT issue on a better footing than it currently is.
 

DJ...

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with the government of the day - that is definitely the intent

my only reason for seeing this as a Parson's egg situation is that I have more confidence in the finance cluster's understanding of reality that trade and industries and this is a global challenge

Economy is flat, ZAR under pressure, spending tight, inflation set to increase, interest rates on the up. They're looking for low hanging fruit...

I also see an opportunity to get the import and export of services VAT issue on a better footing than it currently is.

There are far more efficient ways to achieve this than a blanket introduction of VAT into a supply chain they have no involvement in...
 

Paul Hjul

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well thats the question I need to extract from the draft regulations - does it introduce an additional blanket tax on top of existing prices or does it merely shift the revenue to the point of consumption

If there are refunds from abroad on EU VAT that aren't being claimed - because to claim them necessitates paying the VAT here - I see it far more as a case of governments competing for revenue. Also if the case is to set up shop in SA to pay SA VAT rather than EU VAT then its a good thing. Getting the case to set up shop government has to reduce other costs of doing business though for such an exercise.

-EU VAT being a system that is split between the countries

But yes the real motivation is the insatiable beast that is government spending.
 

Sodan

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well thats the question I need to extract from the draft regulations - does it introduce an additional blanket tax on top of existing prices or does it merely shift the revenue to the point of consumption

If there are refunds from abroad on EU VAT that aren't being claimed - because to claim them necessitates paying the VAT here - I see it far more as a case of governments competing for revenue. Also if the case is to set up shop in SA to pay SA VAT rather than EU VAT then its a good thing. Getting the case to set up shop government has to reduce other costs of doing business though for such an exercise.

-EU VAT being a system that is split between the countries

But yes the real motivation is the insatiable beast that is government [-]spending[/-] stealing.

FTFY
 
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