New regulations from National Treasury, which came into effect on 1 June 2014, mandated that 14% value added tax (VAT) be charged on electronic goods and services sold in South Africa.
When Treasury first released a draft of the regulations at the end of January 2014, it immediately sparked speculation about which international online service providers would bother complying with our local tax laws.
Days before the new tax regulations were originally set to commence (1 April 2014), Australian-based enterprise software company Atlassian – which is also behind code hosting service Bitbucket – informed its South African customers that it would be collecting VAT from them.
Hours after Atlassian’s e-mails became public knowledge, Treasury released its actual electronic services regulations for the purposes of VAT, which delayed the commencement date to 1 June 2014.
The company later indicated that it was just trying to be prepared in case the SA government decided to proceed with the new digital VAT at the start of April.
A week after the new regulations came into effect, an e-mail hit the web in which Apple told developers that it would be changing the pricing tiers for applications sold in South Africa to account for the 14% VAT.
Prices across the South African iTunes music and movie stores have also since increased.
Following the news that Apple would be increasing its retail pricing tiers for the the South African app store, we asked a number of other companies with digital storefronts whether they would be complying with our tax laws.
The table below summarises the responses we received by the time of publication:
|Apple||iTunes||Let developers know about the price change. Responded to queries, but could not provide an official statement.|
|Electronic Arts||Origin||No response.|
|Play Store||Will comply. No comment on effect on pricing.|
|Microsoft||Windows marketplaces||Awaiting feedback.|
|Microsoft||Nokia Store||Will comply. No immediate price increase.|
|Sony Computer Entertainment||PlayStation Store||Awaiting feedback.|
While companies such as EA, Nintendo, and Valve did not respond by the time of publication, it is worth noting that many of them state on their store pages or terms and conditions that taxes are included in the price.
For example, in EA’s terms and conditions for Origin, it includes the following sentence under “Pricing”:
For Australia, EU countries, Iceland, Norway, Switzerland, or South Africa purchasers, and unless otherwise indicated at the time of purchase, prices will include applicable VAT or GST, which will be assessed at a variable rate based on your billing address (including purchases for gifts).