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

MagicDude4Eva

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So a large number of our international electronic goods and services suppliers have provided a response similar to this - now what?

Thank you for contacting us about this matter. We are a USA based company and all our services are provided out of the USA. In addition, our billing is out of the USA.

With this scenario, we do not believe we are subject to issues like this in other countries. In this case we do not have any services based in South Africa or offer services in South Africa.

This response is from a service provider offering hosting and DNS and is widely used by South Africans.
 

krycor

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Checked my AppStore for iPhone/iPad.. its gone up by 14%

Will be interesting to see what happens with recurring payments, i.e. if it was also auto increased accordingly
 

MagicDude4Eva

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I am wondering how SARS will enforce VAT on Paypal payments - most digital downloads do support Paypal. And in the worst case you can use PayPal to fund an overseas throw-away-credit card to then purchase :whistling:
 

MKFrost

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I am wondering how SARS will enforce VAT on Paypal payments - most digital downloads do support Paypal. And in the worst case you can use PayPal to fund an overseas throw-away-credit card to then purchase :whistling:

How will you fund Paypal? Easy to force the banks to charge VAT on any amount that goes to Paypal whether its for digital goods or not.

This whole thing is just a bloody mess. Good idea but with not a moment of though spent on how it will actually be implemented.
 

MagicDude4Eva

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Some more responses - I think Sars will not have an easy time - the responses below are from well known IT service companies providing various hosted solutions:

A large hosting company said:
Thank you for contacting XXXX In regards to your concern, we are a US based corporation and therefore do not charge VAT. If you have any other questions, or concerns, please feel free to get into contact with us. Thank you for your time and business with XXXX!

A large mail-company said:
Thank you for bringing this to our attention. As we have a very small amount of customers that reside in South Africa, we are not going to be taking action or making any changes in how we tax our services. We will not be remitting tax payments and will continue to invoice and collect in USD. We will continue to offer services to our South African customers.

A large GeoIP/security company said:
We were not aware of the changes to South African tax laws until now, so we are looking into the matter and will discuss it with our legal counsel.
 

MagicDude4Eva

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So out of 20 (!) international suppliers, of which all offer various hosted- and subscription based services to many local companies, only 2 confirmed that they are aware of the VAT changes and will comply. The remaining 18 stated that they are a non-SA company and as such have no obligation to pay VAT.

Curious to see how SARS will tackle this...
 

Paul Hjul

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Of the 18 suppliers how many of them are under an obligation in their own jurisdiction to pay taxes of various shapes and forms that are due on the assumption of in-jurisdiction consumption?

And are the 2 suppliers going to comply with our VAT and offset that compliance against any rebate in their own jurisdiction?

In my mind that is the core issue: The way Treasury is approaching this issue is to try to put an extra bit of tax on the industry rather than SARS dealing with the discrepancy that exists within the VAT system

If hosts in Europe can charge us 14% rather than the applicable EU VAT it is a score - the US is a bit uglier because of the complexities of their sales tax system.
 

MagicDude4Eva

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Of the 18 suppliers how many of them are under an obligation in their own jurisdiction to pay taxes of various shapes and forms that are due on the assumption of in-jurisdiction consumption?
All of them pay consumption-/sales tax. Ironically some are UK based, paying/charging EU VAT but have no inclination paying/charging SA VAT.

And are the 2 suppliers going to comply with our VAT and offset that compliance against any rebate in their own jurisdiction?
They will (not sure how the offsetting/rebate in their own jurisdiction would work) - here a response from one of my questions:

VAT question to vendor said:
Since your pricing is based in USD and Rand value fluctuates heavily, how will you deal with exchange rate fluctuations (i.e. if we pay via corporate credit card) - would you convert your prices at time of payment to Rand and then present an invoice with VAT or how will this work?

Response supplier said:
We encounter this same issue when selling to European customers and reporting VAT for EU purposes. Our systems convert USD amounts into euros on the date of the invoice (which is the same as the date of payment for [COMPANY-NAME] sales) so that our USD systems will always report VAT that has been actually collected and invoices will always report VAT in Rands that has been actually paid.

Since the amount of VAT paid is disclosed in Rands, FX movements should not affect the amount of VAT South African customers might be able to claim back from SARS.

Just like with the EU, any difference between what is collected and what is required to be paid to SARS caused by FX movement is expected to be paid out of [COMPANY-NAME] pocket.
 

psion

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SARS finds out about something that has no tax then they jump to put tax on but dont know how, just taxing something is more important
 

Paul Hjul

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The UK based providers are of particular interest to me because this is the simple reality. Big invoices involving service provision from the UK results in providers on that side not paying VAT (ultimately not paying how exactly the liability at time of invoice and deductions work is beyond me) to the UK while there is a payment to SARS of VAT in the smaller amount. Now if paperwork with an administrative cost of 1k is involved but there is a 10k tax benefit it simply makes sense to do

but on an annual subscription of Office356 for a household?
 

Sonic2k

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SARS finds out about something that has no tax then they jump to put tax on but dont know how, just taxing something is more important
Of course, how dare the public "defraud" the fiscus and not keep the profiteerers i.e. rip-off-artists in business
 

alloytoo

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I don't - I think Apple, Amazon, Steam and PayPal will tell them to go fsck themselves. Unless I am missing something, there is no way this can be enforced unless international companies comply and why should they?

This isn't a uniquely South African problem, many countries are wondering just how to do this.
 

Paul Hjul

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This isn't a uniquely South African problem, many countries are wondering just how to do this.

it isn't a uniquely South African problem but the current "solution" is a uniquely South African solution that doesn't deal with the actual problem

several US States went ahead with uniquely American solutions to the problem using South Africa's attitude and they inflicted massive damage on their own economy
the problem lies at the heart of a consumption tax system and securing payment of consumption taxes by a vendor over whom you don't have jurisdiction
 
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