vat on e-commerce : current position and way forward presentation for the south african online user...

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

28 August 2014VAT on e-commerce 2

VAT ON E-COMMERCE

Topics for discussion

Why the change?

VAT on e-services

Final Regulations

Registration, compliance and enforcement


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


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


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


VAT ON E-COMMERCE

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?


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


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).


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


VAT ON E-COMMERCE

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.


VAT ON E-COMMERCE

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


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.


VAT ON E-COMMERCE

PRACTICAL EXAMPLE


PUBLISHING COMPANY

SA UNIVERSITY

WEBSITESERVER

Contractual ArrangementInvoicing and payment

OFFSHORE

SA

CLOUD SERVER

QUESTIONS?

vat on e-commerce : current position and way forward presentation for the south african online user...

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