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New South African VAT laws ‘favour foreigners’

09 June 2014   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (The Citizen)

Global internet companies that supply e-books, apps, music and other digital services in South Africa are now obliged to register as value-added tax (VAT) vendors in South Africa.

Foreign suppliers of electronic services must register where the supplies of such services are made to locals or payment is made locally for goods worth more than R50 000. This will likely affect entities like eBay, Apple, Amazon and Google.

Gerard Soverall, head of indirect tax for PwC Gauteng, says the change levels the playing field between local and international suppliers.

Up until June 1, foreign suppliers – unlike their local peers – were able to sell electronic services to South African consumers without VAT.

Charles de Wet, PwC head of indirect tax for Africa, says domestic vendors will lose out: "In this particular space we haven’t got it right at all because the threshold for a local business to register is R1m whereas the threshold for a business that supplies electronic services is R50 000.”

Soverall complains no distinction is made between Business-to-Business (B2B) and Business-to-Consumer (B2C) transactions.

Many large B2B suppliers of electronic services are now being forced to register as VAT vendors although the imported services provision enabled the supply to be taxed anyway.

Uncertainties remain regarding the definition of services that are included, he says.

De Wet says the new regulations introduce a risk of a "missing trader”, where foreigners register for VAT, charge it and keep it.

Previously, at least the local vendor would have paid over the tax.

This article first appeared on citizen.co.za.



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