VAT on digital goods

[duncan drennan]

I see that SARS will soon be collecting VAT on digital goods which are imported into RSA from April, which they have been speaking about for a while. This is the article that I happened to be reading about it, http://businesstech.co.za/news/gener...ming-in-april/

That means that any offshore services such as web hosting, or digital goods such as eBooks, are going to be subject to 14% VAT.

What I am wondering is how exactly this is going to be implemented. How will SARS collect VAT from the various offshore service providers? Or are the purchasers of goods going to be somehow liable to mange this process? Anyone have any ideas about the practical implications that this might have?

[Justloadit]

I am pretty sure that at the time of purchase, there will be a trigger mechanism, which will immediately debit your credit card, and the entry will be referred to as VAT. The credit card company will immediately dispatch the money to SARS.

[Dave A]

Here is the draft regulation, but that really is just a pile of definitions. It looks like we'd have to look at the VAT Act and associated regulations to get an idea of the "consequences".

There has been a steady stream of murmurs about the "consequences" / practical implementation issues, but I haven't seen anything concrete yet that sets out the mechanisms.

One of those murmurs is that offshore suppliers will have to register for VAT if their sales into SA exceeds R50k per annum. This seems pretty harsh as mandatory registration for VAT in SA only starts from R1million per annum!

When it comes to how it'll be detected, I think this part of the draft gives a clue -

2. (2) These regulations apply to any supply of electronic services in the course or furtherance of an enterprise carried on by a person from a place in an export country—

(a) to a recipient that is a resident of the Republic; or
(b) where any payment to that person in respect of such electronic services originates from a bank registered or authorised in terms of the Banks Act, 1990 (Act No. 94 of 1990).

Pretty safe to say there's going to be tracking of payments to offshore accounts involved.

About as far as I've got on this so far.

I've been keeping a weather eye on developments as I need to know if it's going to affect my offshore private server rental. Pretty safe to say if the hosting company has to register for VAT in SA, they're rather going to give me the heave ho than register for what would be just a small handful of clients, and I'm going to have to rearrange a few things pretty quickly.

[duncan drennan]

I've been keeping a weather eye on developments as I need to know if it's going to affect my offshore private server rental. Pretty safe to say if the hosting company has to register for VAT in SA, they're rather going to give me the heave ho than register for what would be just a small handful of clients, and I'm going to have to rearrange a few things pretty quickly.

It will be interesting to see how this works itself out - it is exactly the same kind of thing that I'm wondering about (we have an offshore server, and use a few other offshore services too). I wonder if PayPal potentially offers a work around (in the case that the offshore company withdraws their services). Alternatively there are going to be a lot of people scrambling to organise offshore credit cards.

Just to make it clear, I have no problem paying the VAT, I'm just concerned about how this is going to work itself out practically and what the knock-on effect will be.

I would be pretty satisfied with the system Victor has suggested.