oa Journal of Economic and Financial Sciences - Value-added tax on imported electronic services : a critical evaluation of the newly enacted South African legislation

Volume 9, Issue 1
  • ISSN : 1995-7076



Effective from 1 June 2014, all foreign businesses supplying digital products such as mobile applications to be used in South Africa are required to register as vendors. This amendment was made to align South Africa with an international trend of bringing cross-border supplies of electronic services into the Value-Added Tax regime. It effectively shifts the Value-Added Tax liability from the importer to the foreign supplier. The reverse-charge-mechanism resulted in an erosion of the tax base and placed local suppliers of digital services at a competitive disadvantage compared to foreign suppliers. This paper critically evaluates the amendment to the Value-Added Tax Act using a literature review. The aim is to determine to what extent the amendments address the shortcomings of the reverse-charge mechanism, are aligned with practices in the European Union and New Zealand and whether they comply with the principles of an effective tax system.

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