VAT ON E-COMMERCE : CURRENT
POSITION AND WAY FORWARD
PRESENTATION FOR THE SOUTH AFRICAN ONLINE
USER GROUP
Ruaan van Eeden
Director - Tax
B.Com (Acc), Higher Diploma in Tax Law, M.Com (SA & International Tax)
VAT ON E-COMMERCE
VAT on e-commerce
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VAT ON E-COMMERCE
Topics for discussion
Why the change?
VAT on e-services
Final Regulations
Registration, compliance and enforcement
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VAT ON E-COMMERCE
South Africa imposes VAT on a consumption basis
The consumption basis leaves certain gaps in the definition of
“enterprise”
South Africa does not have specific place of supply rules
VAT on imported services / reverse charge mechanism
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VAT ON E-COMMERCE
E-commerce difficult to tax as it could be multi-jurisdictional
and ever changing
international trend is to impose VAT where the recipient of the
services resides
foreign suppliers of electronic services required to register as
vendors –
R 50,000 per annum turnover threshold (payment basis)
effective date 1 June 2014
regulation issued by Minister of Finance stating which type of
services must register for e-services VAT
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VAT ON E-COMMERCE
PRE 1 JUNE 2014 POSITION FOR EDUCATIONAL
INSTITUTIONS
exempt supplies by an educational institution
VAT on imported services / reverse charge mechanism
applicable to ‘educational services’
the “enterprise” definition
lack of ‘place of supply’ rules and the need to even out the
playing field
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POST 1 JUNE 2014 POSITION FOR EDUCATIONAL
INSTITUTIONS
14% increase in cost of electronically supplied services
unable to claim input tax by virtue of making VAT exempt
supplies under section 12 of the VAT Act
can the educational institution still be held liable for VAT if
foreign supplier refuses to register?
VAT on imported services still remains as backstop
what about ‘educational services’ exemption in section 14?
what about ‘educational authority’ exemption in Regulations?
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VAT ON E-COMMERCE
VAT registration and foreign suppliers
 Section 7(1)(a) of the VAT Act- levying of VAT in respect of the
supply by any vendor of goods and services in the course or
furtherance of any enterprise carried on by that vendor.
 a person or business that is not physically active in South
Africa would not ordinarily be seen as carrying on an
enterprise
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VAT ON E-COMMERCE
 The Taxation Laws Amendment Act, No 31 of 2013 introduced
amendments to the VAT Act that introduced a specific ‘place of
supply’ rule in respect of electronic services.
 Specifically, the definition of an 'enterprise' has been amended
to include, the supply of electronic services, by a person or
business outside of South Africa to a recipient in South Africa
(or where payment for the services comes from a South
African bank).
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VAT ON E-COMMERCE
 The foreign supplier of electronic services will become liable to
register as a vendor at the end of any month where the value
of taxable supplies by that person has exceeded R 50 000.
 Accounting for VAT will be on a payments basis and
compulsory through e-filing.
 Foreign suppliers only required to issue abriged tax invoices.
 No refunds to be paid – any overpayments will be set-off
against future liabilities
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 Final Regulations
 On 28 March 2014 National Treasury published the Government
Gazette No 37489, Notice R221 (the "Regulations") which
narrowed the definition of electronic services.
 Under the Regulations, electronic services are divided into
specific categories  educational services;
 games and games of chance;
 internet-based auction service;
 miscellaneous services; and
 subscription services.
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 Final Regulations
 Educational services include –
 Distance teaching programmes;
 Educational webcasts;
 Internet based courses;
 Internet based education programmes; or
 Webinars
But only if the supplier of the service is NOT regulated by an
‘educational authority’ in the export country
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VAT ON E-COMMERCE
 Final Regulations
 Subscription services include –
 Blogs, journals, magazines, newspapers;
 Games;
 Internet based auction services;
 Periodicals, publications;
 Social networking service;
 Webcast;
 Webinar;
 Website;
 Web application;
 Web series.
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VAT ON E-COMMERCE
PRACTICAL EXAMPLE
SERVER
WEBSITE
PUBLISHING
COMPANY
OFFSHORE
SA
SA
UNIVERSITY
Contractual Arrangement
Invoicing and payment
CLOUD
SERVER
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QUESTIONS?