Foreign electronic services

In a recent report by the Davis Tax Committee, recommendations were made in order for South Africa to address various problems in relation to e-commerce transactions. With the continuous advancement of technology, it is becoming difficult to track (and tax), the sale of electronic goods and services.

The legislature has recently introduced changes to the Value Added Tax Act, No 89 of 1991, requiring certain foreign suppliers of electronic services to register as vendors, and to account to SARS in respect of Value-added Tax (VAT) on their supplies.

SARS also issued regulations in which various electronic services have been listed, and on which foreign vendors need to account for VAT. However, the regulations are somewhat problematic in that they appear to focus on certain technologies and products, leaving out certain others (for example certain cloud-based services).

The Minister has now proposed that the regulations prescribing electronic services be updated to include software and other electronic services, as well as address some uncertainties.