Most Read Contributor in South Africa, September 2016
The VAT legislation has been amended with effect from 1 April
2014 to give effect to government's proposal that all foreign
suppliers of electronic services in South Africa are required to
register for VAT in South Africa.
The legislation amendment places an obligation on foreign
suppliers to register for VAT in South Africa if they make supplies
of electronic services in excess of R50 000 in a 12 month period to
South African customers who are either tax resident in South
Africa, or where payment for the services by such customers
originates from South African banking accounts.
The final regulations specifying what constitutes
'electronic services' for purposes of the VAT Act were
published on 28 March 2014, but they will only come into force on 1
June 2014. Therefore, although the legislative amendment in this
regard is effective from 1 April 2014, foreign suppliers of
electronic services only need to register and comply with the VAT
Act requirements from 1 June 2014.
The scope of the final regulations has been significantly
reduced from that of the draft regulations first published,
following a consultation process undertaken by National Treasury.
The electronic services which are included in the regulations, and
for which supply foreign suppliers must register for VAT in South
Africa, are the following:
educational services, excluding educational services provided
by a supplier that is regulated by an educational authority in the
games and games of chance;
internet-based auction services;
the supply of e-books, audio visual content, still images or
subscription services to any journal, magazine, newspaper,
game, publication, web application etc.
The reduced scope of the regulations is welcomed. The electronic
services which were included in the draft regulations such as the
transmission or routing of data messages, data processing and
storage of data, maintenance and technical support of a web site
and the supply of software (which are all now excluded) are
generally supplied to businesses who are in any event entitled to
claim any VAT payable as input tax. The inclusion of these services
would only have resulted in increased administration for the SARS
and the foreign supplier, with very little (if any) additional
revenue for the State.
It should be noted that where any electronic services which are
not listed in the regulations and which are supplied to a consumer
who would not be entitled to claim the VAT as input tax if VAT
would have been charged, the consumer remains liable to account for
VAT on such services as imported services.
SARS has simplified the VAT registration process for foreign
suppliers of electronic services who are obliged to register for
VAT in South Africa. The foreign supplier must complete a VAT
registration application form VAT 101, which must be submitted
together with certain required documentation. The application form
and documents can be submitted via electronic mail to SARS for
processing. The foreign supplier is also not required to open a
South African bank account, and the appointment of a South African
resident representative vendor is also not required. Foreign
suppliers of electronic services are entitled to apply for VAT
registration from 7 April 2014, but the registration will only be
made effective from 1 June 2014. SARS has also published a VAT
Registration Guide for Foreign Suppliers of Electronic
Services to provide guidance with the registration process,
the submission of VAT returns and the payment of VAT. The Guide is
available on the SARS website.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
In response to information provided by FIRS, NSE has sent letters to publicly listed companies, who were purportedly identified by FIRS as non-compliant.
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