Changes to the value added tax (VAT) rules that apply for foreign suppliers of e-services are being considered in South Africa.
In 2014, the VAT law was amended to provide that foreign suppliers of electronic services (e-services) must register for VAT purposes under certain circumstances. Even though the definition of e-services contained in the regulation was not limited to supplies made by businesses to consumers (B2C), it was very specific as to the services that are considered to be e-services for VAT purposes.
The Minister of Finance in February 2018 announced in the national budget speech that the current rules concerning and defining “e-services” would be amended for VAT purposes.
Draft regulations were issued (21 February 2018) with a request for comments from the public and stakeholders. The draft VAT regulations (with an initial effective date of 1 October 2018) would broaden the definition of e-services. As a result, except for very few exceptions, most services supplied electronically would be within the definition of e-services. Thus, a majority of non-residents supplying services electronically to South African recipients must register for VAT purposes in South Africa.
Subsequent to the release of the draft regulations in February 2018, the National Treasury and South African Revenue Service held workshops with stakeholders to discuss comments received with regards to the draft regulations. During one presentation to the Standing Committee on Finance (part of the process to enact draft legislation), certain changes were recommended, with a request for a similar consultation process and opportunity for the public and stakeholders to comment.
It was requested that the proposed changes to the e-services rules be introduced with an effective date from 1 April 2019 and that the VAT registration threshold be increased from ZAR 50 000 to ZAR 1 million to align it with the VAT registration threshold for domestic supplies.
For more information, contact a KPMG tax professional in South Africa:
Erina Cooper | +27 (0) 82 719 5758 | firstname.lastname@example.org
© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.