The National Treasury recently released an amended regulation for electronic services. The regulation which will go into effect on 1 April 2019 will impact international suppliers of services to South African customers. These international service providers like Netflix must now evaluate whether their business qualifies as “electronic services” and whether they will be liable to register for VAT in South Africa.
The impact of the newly amended regulation means all services supplied from abroad by means of an electronic device and the Internet could now be charged VAT. The amended terms could affect a wide range of everyday things such as software subscription services, broadcasting, cloud computing, advertising services, gaming as well as any reservation services made via an online platform.
These regulations mean that companies such as Netflix, Facebook, and Google will likely have to register for VAT and this extra tax could be passed on to us South African consumers through increased prices.
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. The customer would ultimately bear the value-added tax in the form of higher prices as VAT is – in economic parlance – a consumption tax.” Seelan Moonsamy, VAT Expert | Baker & McKenzie