In response to the ever-increasing world of e-commerce and cross-border digital trade, South Africa introduced legislation with effect from 1 June 2014 which requires foreign suppliers of e-services to register as value added tax (VAT) vendors. The National Treasury stated at the time that the amendment did not impose a new tax, but merely shifted the tax liability for e-services from the local recipient to the foreign supplier. South Africa was one of the first countries in the world to tax e-services in this way.
Foreign suppliers of e-services must register for VAT in South Africa if at least two of the following requirements are met:
- the recipient of the services is a South African resident;
- the payment for services originates from a South African bank account; or
- the recipient has a business, residential or postal address in South Africa.
Foreign e-services suppliers must register for VAT as soon as the value of the services exceeds R50,000. The current regulations divide ‘electronic services’ into specific categories, including:
- non-regulated educational services;
- games and games of chance;
- internet-based auction services;
- music and subscription services to websites; and
- web applications.