n Business Tax and Company Law Quarterly - The South African VAT implications for foreign suppliers of electronic services - the final regulations

Volume 5, Issue 2
  • ISSN : 2219-1585


In a previous article, the author considered the supply of digital products by non-resident suppliers to resident consumers under the draft regulations that had been issued to give effect to the proposed taxation of 'electronic services' supplied from outside South Africa. The article sets out how such supplies would have been subject to VAT under the then existing provisions of the VAT Act, namely on the basis that the services would have constituted 'imported services' as defined. It was noted that compliance was practically non-existent and that the proposed new taxation regime was a response to this non-compliance. In essence, the law was amended to require any person who supplies 'electronic services' to recipients who are resident in South Africa, to register as vendors for South African VAT purposes. 'Electronic services' as defined in the draft regulations would have included electronic services supplied both to final consumers (so-called B2C) and to businesses (so-called B2B). It is apparent that, following representations from business, the ambit of the definition of 'electronic services' has been narrowed down in the final regulations that were issued on 28 March 2014 so as to apply mainly to B2C-type transactions. This article discusses the ambit of the final regulations and highlights some of the issues that may arise for services not specifically catered for or provided for in terms of the final regulations.

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