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South Africa - Value Added Tax

Are there rules for taxing digital services

Yes - in force.

Applicable date

Amended Regulations to expand the scope of VAT imposed for electronic/digital services were published with effect from 1 April 2019.

Nature of tax

Value-Added Tax (VAT).

Tax rate

15%.

Affected business models/in-scope activities

Any services supplied by means of an electronic agent, electronic communication or the internet, for any consideration, by a person from a place in an export country and where the recipient of the services is: a SA resident, the payment for services originates from a SA bank account, or the recipient has a business, residential or postal address in SA (at least 2 of the last 3 circumstances must be present). Applies to both B2C and B2B models.

Revenue stream in scope

Provision of digital services; Provision of third party content; Online advertising; Sales of user data; Provision of own content; Online licensing of software; Radio / television online broadcasting service.

In scope of tax treaties?

No.

Thresholds / de-minimis

Threshold before 1 April 2019 - Taxable supplies generated from previously prescribed in-scope South African electronic services exceed ZAR 50,000 in any 12-month period (measured from 1 June 2014).

Deduction or credit for recipient (DST only)

Yes, provided that the recipient is registered for South African VAT and uses the digital services for making taxable supplies. Furthermore, to be entitled to claim an input tax deduction, the recipient is required to keep a valid tax invoice in respect of the digital services supplied.  The tax invoice is required to contain the particulars set out in Binding General Ruling 28 issued by the South African Revenue Service and must be kept for a period of 5 years.

Exemptions

(a) educational services supplied from a place in an export country and regulated by an educational authority in terms of the laws of that export country;
(b) telecommunications services; or
(c) services supplied from a place in an export country by a company that is not a resident of South Africa to a company that is a resident of South Africa if (i) both those companies form part of the same group of companies (70%), and (ii) the company that is not a resident of South Africa itself supplies those services exclusively for the purposes of consumption of those services by the company that is a resident of South Africa.

Revenue or profits based tax

Revenue.

Revenue in scope

Revenues from sales/services to local consumers/users.

Revenues from sales / services to local businesses.

Who do these rules apply to

Non-resident companies with no local PE.

Reporting / Compliance obligations

VAT returns for electonic services must be filed electronically (via SARS efiling). VAT registration is mandatory where taxable supplies exceed ZAR 1 million in any 12-month period (A business may also register for VAT voluntarily if the business carries on an "enterprise" and the taxable supplies in the past 12-month period exceeded ZAR 50,000). Bi-monthly VAT filing periods are the norm, unless taxable supplies in a 12-month period exceed R30 million in which case monthly VAT filing periods may apply.

OECD membership

No.

As at

20/07/2020

BDO local resources BDO in South Africa

 

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