TechCentralTechCentral
    Facebook Twitter YouTube LinkedIn
    Facebook Twitter LinkedIn YouTube
    TechCentralTechCentral
    NEWSLETTER
    • News

      Standard Bank IT spending tops R10-billion in six months

      19 August 2022

      Hungry Prosus to splurge up to R30.7-billion on iFood stake

      19 August 2022

      Koeberg unit shut down due to mechanical fault

      19 August 2022

      Blue Label expects robust full-year earnings growth

      19 August 2022

      Sarb tells banks they should work with crypto exchanges

      18 August 2022
    • World

      15 September pegged as target date for ethereum’s big ‘Merge’

      19 August 2022

      Qualcomm gets serious about servers

      19 August 2022

      China blasts US over ‘discriminatory’ Chips Act

      18 August 2022

      Tencent reports first-ever sales decline

      17 August 2022

      Chip makers are flashing a big warning for the global economy

      17 August 2022
    • In-depth

      Are you a chronic procrastinator? Read this!

      18 August 2022

      Semiconductor boom turns to bust

      16 August 2022

      African unicorn Flutterwave battles fires on multiple fronts

      11 August 2022

      The length of Earth’s days has been increasing – and no one knows why

      7 August 2022

      As Facebook fades, the Mad Men of advertising stage a comeback

      2 August 2022
    • Podcasts

      Qush on infosec: why prevention is always better than cure

      11 August 2022

      e4’s Adri Führi on encouraging more women into tech careers

      10 August 2022

      How South Africa can woo more women into tech

      4 August 2022

      Book and check-in via WhatsApp? FlySafair is on it

      28 July 2022

      Interview: Why Dell’s next-gen PowerEdge servers change the game

      28 July 2022
    • Opinion

      How AI could transform financial services in emerging markets

      19 August 2022

      No reason South Africa should have a shortage of electricity: Ramaphosa

      11 July 2022

      Ntshavheni’s bias against the private sector

      8 July 2022

      South Africa can no longer rely on Eskom alone

      4 July 2022

      Has South Africa’s advertising industry lost its way?

      21 June 2022
    • Company Hubs
      • 1-grid
      • Africa Data Centres
      • Altron Document Solutions
      • Amplitude
      • Atvance Intellect
      • Axiz
      • BOATech
      • CallMiner
      • Digital Generation
      • E4
      • ESET
      • Euphoria Telecom
      • IBM
      • Kyocera Document Solutions
      • Microsoft
      • Nutanix
      • One Trust
      • Pinnacle
      • Skybox Security
      • SkyWire
      • Tarsus on Demand
      • Videri Digital
      • Zendesk
    • Sections
      • Banking
      • Broadcasting and Media
      • Cloud computing
      • Consumer electronics
      • Cryptocurrencies
      • Education and skills
      • Energy
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Motoring and transport
      • Public sector
      • Science
      • Social media
      • Talent and leadership
      • Telecoms
    • Advertise
    TechCentralTechCentral
    Home»A»SA losing out on tax online

    SA losing out on tax online

    A By Craig Wilson9 September 2013
    Facebook Twitter LinkedIn WhatsApp Telegram Email
    Anne Bardopoulos
    Anne Bardopoulos

    South African Internet users purchasing goods, especially virtual services and content, from international suppliers are hurting the fiscus and making local businesses less competitive. That’s the view of a tax specialist at auditing firm Deloitte, who says VAT is seldom levied on these purchases.

    VAT is generally not being accounted for when consumers download movies, music, games, software, books and other products from foreign suppliers, which Deloitte argues raises concerns that consumers are “willingly or unwittingly ignoring statutory requirements”.

    Anne Bardopoulos, manager in the tax service department at Deloitte, says another consideration is that government does not have the resources to police what she calls a “significant loss of tax revenue”.

    The crux of the matter is the lack of “place of supply” rules, which results in “uncertainty as to whether a foreign supplier is required to register and collect VAT from South African residents, especially when e-commerce transactions are involved”, Bardopoulos says.

    It does not matter whether a foreign supplier disputes its obligation to register for VAT in South Africa, as the tax can still be collected in terms of the “reverse charge mechanism”, in terms of which the consumer pays the VAT, she says.

    Although the effect of VAT not being paid on international purchases is difficult to measure, Bardopoulos says it is “undoubtedly substantial”.

    “The impact also has to be considered as foreign merchants, often with larger markets and other supply benefits, are often cheaper. Add an additional 14% price advantage and the competitive edge over South African suppliers of similar products increases markedly.”

    Finance minister Pravin Gordhan in February proposed that foreign businesses selling e-books, music and other digital goods and services should be required to register as VAT vendors “in line with regulations which have been adopted by the European Union and other tax jurisdictions”.

    However, Bardopoulos says the draft amendments to proposed legislation assign a broad definition to e-commerce, which could be problematic because it could create uncertainty regarding which services should be considered as e-commerce.

    The draft amendments propose that foreign e-commerce suppliers should not be subject to a threshold on taxable revenue — currently set at R1m in any 12-month period — and therefore would need to register if conducting any business with South African residents, Bardopoulos explains, even if for only a nominal amount.

    However, she says the issue of enforcing this proposed legislation and its wide reach have not been addressed in the draft bill.

    The threshold will still apply to local online retailers, who will have a greater advantage than foreign suppliers where their supplies do not exceed the threshold. These companies will not be required to register and levy VAT.

    “The proposed amendments will introduce a ‘place of supply’ rule … by stipulating that supplies will be taxable in South Africa if the consumer is a resident of South Africa or payment is effected from a South African bank account,” she says. “The practicality of requiring the foreign supplier to determine if the consumer is a South African resident will need to be addressed.”

    Other potential pitfalls of the draft legislation include whether foreign suppliers will have to comply with issuing a valid abridged South African tax invoice; the need for sellers to make it clear on their websites whether or not they include VAT; and whether foreign suppliers registering for VAT in South Africa will have to operate a South African bank account, appoint a local VAT representative, or ensure that required documentation is “open for inspection” by the South African Revenue Service.

    “Regardless of these and other issues that have to be resolved, the proposed amendments represent a move in the right direction to reduce the loss of tax revenue arising from digital media supplies,” Bardopolous says.  — (c) 2013 NewsCentral Media

    Anne Bardopoulos Deloitte Pravin Gordhan
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email
    Previous ArticleStart with the Finnish
    Next Article Service key to cutting mobile churn

    Related Posts

    Are you a chronic procrastinator? Read this!

    18 August 2022

    Semiconductor boom turns to bust

    16 August 2022

    African unicorn Flutterwave battles fires on multiple fronts

    11 August 2022
    Add A Comment

    Comments are closed.

    Promoted

    Does your contact centre have the CX factor?

    19 August 2022

    Entelek, A2pay to roll out 2 500 free Wi-Fi sites in South Africa

    18 August 2022

    Companies are drowning in data – but solutions are at hand

    18 August 2022
    Opinion

    How AI could transform financial services in emerging markets

    19 August 2022

    No reason South Africa should have a shortage of electricity: Ramaphosa

    11 July 2022

    Ntshavheni’s bias against the private sector

    8 July 2022

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2022 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.