South Africa delays implementation of VAT on foreign digital supplies

Thu 26th Dec 2013

Plans to implement South African GST on digital supplies have been delayed from January 2014 until at least the start of April 2014.

In a change the Taxation Laws Amendment Act, the South African Revenue confirmed it will not be in a position to levy Goods and Services Tax at 14% on foreign providers of steamed music, video or ebooks etc. to consumers.

South Africa charges GST on digital B2C

Plans to start taxing digital B2C supplies were drafted in 2013 following the loss by SAR GST of a test case against Microsoft Ireland. It had been providing ‘Cloud’ services to South African consumers with neither Irish VAT nor South African GST.

In the EU, digital B2B supplies are charged at the VAT rate of the supplier. This has resulted in many of the largest providers (e.g. Amazon and Skype) locating their services in Luxembourg, which has the lowest VAT rate in the EU – 15%. However, this is scheduled to switch to the country of consumption – which means where the consumer is based. This will commence from 1 January 2015.

Non-EU digital B2C companies already charge the VAT rate according their EU customers’ country of residence. There is a single one-stop-shop portal for a single VAT return to be filed to declare all taxes. This means the providers do not then have to register for VAT with each EU member state.



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