As of the 1st of April, you will have to cough up a little bit more for your digital or online purchases.
The National Treasury has announced that they will be implementing a 14% VAT tax on all digital and online products, services and tech support. Sounds a little cunning? Well, according to Minister of Finance, Pravin Gordhan, it‘s not.
In 2013‘s budget speech, Gordhan proposed a new regulation that will add VAT to foreign business traders that “œsell e-books, music and other digital goods and services“.
Now, it seems that the proposal has turned into a reality. The minister recently published the all new “˜Electronic Services Regulations‘ for comment.
According to these regulations, VAT will be added to any supplier of electronic services that originate from an “œexport country“, to any resident in South Africa or where any local bank is used.
Products and services that will be taxed have been divided into categories – although it‘s basically everything that is either digital or provides a service online that will now have an added 14% VAT.
Firstly, educational services such as webinars, educational webcasts, internet-based educational programmes and courses as well distance teaching programmes will be taxed.
Maintenance services, which refers to tech support and related queries will also get the extra 14%. These include tech support for blogs, information systems and services, websites and databases.
Online auction services also form part of the new regulations.
Where online content is concerned, the category gets rather complex. almost everything from e-books to software and music will be taxed. Below is more detailed list, explaining in detail what services and products will be taxed:
- e-books – any digitised content of any book or electronic publication;
- films, – any broadcast, documentary home-made video, live streaming performance, movie, music video, program, television series, or video
- images, – any desktop theme, photographic image, pictorial image, or screensaver,
- music,– audio clip, broadcast jingle, live streaming performance, ringtone, song, or sound effect,
- software, – apps, system software, or plugins, and any update to these programs.
Subscription services, which is growing everyday in South Africa, are also being taxed. These include subscriptions to:
- blogs;
- databases;
- information system services;
- journals;
- magazines;
- newspapers;
- games;
- social networking services;
- webcasts;
- websites;
- web applications;
- web series
Naturally, with the added 14% VAT, the price of digital goods will be increase exponentially – and this will probably not sit well with people who use the internet to buy things or make use of online-based services on a daily basis.
However, Gerard Soverall, head of indirect tax at PWC, said that online retailers generate large amounts of revenue, and with that, the government is losing out on huge amounts of VAT.
“œIt is a profit issue at the end of the day. VAT at 14% in South Africa is a material number in your profits so online businesses will pass that on to consumers. There is not much doubt in that,“ he said.
But, before the whole country gets up in arms about the new “˜Electronic Services Regulations‘, Soverall explained that while the price of digital goods will (obviously) increase, they are most likely to still be more affordable than their physical counter-parts bought in-store.
It‘s never nice to hear that you will have to pay more tax – whether it‘s for physical products or digital goods. While the new regulations have been published for comment, we would like to hear your comments.
Do you think it‘s fair of the government to add VAT to digital goods and online services? Or is it yet another way for them to make more money? Let us know what you think.
Source: MyBroadband
