New “Netflix” tax in South Africa – Netflix responds

Netflix is already paying VAT in South Africa, the company told MyBroadband.

Its statement was in response to questions about the new “Netflix” tax to be introduced in South Africa.

The National Treasury recently published an amended regulation for electronic services, which has an effective date of 1 April 2019.

It will impact international suppliers of services to South Africans, which must evaluate whether their supply of services qualifies as “electronic services” and whether this will create a liability to register for VAT.

According to Baker & McKenzie, the impact of the amended regulation is that all services that are supplied from abroad by an electronic agent, electronic communication, or the Internet are now electronic services for the purposes of VAT.

“What is envisaged by the definition is that the services being supplied are essentially automated and involve minimal human intervention and are impossible to ensure in the absence of information technology,” said Baker & McKenzie.

“Only a limited number of services that may be provided by the above means are excluded from the definition of electronic services, namely educational services regulated in the export country of the foreign service provider, and telecommunication services.”

This means “broadcasting”, and the likes of streaming services such as Netflix, will be affected.

Price increases

Speaking to BusinessTech, Seelan Moonsamy, a VAT expert at Baker & McKenzie, said that the regulations will likely lead to companies such as Netflix, Facebook, and Google having to register for VAT.

“If these companies deliver its services by electronic means and the total value of its services exceed R1 million on a rolling 12 month period they will have to register.”

He added that this extra tax will likely be passed on to South African consumers through increased prices.

Netflix South Africa, however, told MyBroadband it is already paying VAT in the country.

Asked whether this means the new regulation will have no impact on subscription pricing, Netflix said it could not comment at this stage.

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New “Netflix” tax in South Africa – Netflix responds