As of November 2015 Taxamo has provided support for businesses seeking to comply with the South Africa digital VAT system.
The South African Revenue Service (SARS) was one of the international pioneers in changing the approach to taxing digital services. On June 1, 2014, non-resident suppliers of certain “electronic services” to South African residents (or if payment originates from South Africa) are required to register for VAT.
All foreign digital service suppliers with sales revenue exceeding ZAR 50,000 need to register, and must store transaction data for 15 years.
South Africa going digital and mobile
There are currently some 15 million internet users in South Africa, less than half the population, but a Cisco Visual Networking Index 2015 report predicts that this will rocket to 27 million by 2019. As a result of this internet penetration boost the Cisco report expects a boom in the consumption of video streaming services in South Africa:
“In South Africa, 43 billion minutes (81,826 years) of video content will cross the Internet each month in 2019. That’s 16,365 minutes of video streamed or downloaded every second. Business IP video traffic will be 68% of business IP traffic in 2019 and consumer IP video traffic will be 81% of consumer IP traffic in the same time period. Also, Internet video will be 71% of all business Internet traffic in 2019.”
Another interesting snapshot of South African digital eCommerce future is highlighted in this report from SouthAfrica.info. Quoting a study produced by Orange Horizons on the provision of wi-fi in a region of Cape Town, this report stated that 94% of respondents said that their primary means of connecting to the internet was a smartphone. Viewing social media, downloading content, and streaming made up the most of the users’ activities, according to the Orange Horizons study.
A recent GSMA report titled The Mobile Economy: Sub-Saharan Africa 2015 has shown that South Africa leads in mobile application downloads in the sub-Saharan Africa.
The report quotes data from a March 2015 Ipsos survey of South African internet users and found that:
- 20% of South African internet users have made purchases online, and
- 48% expect to do so “in the future”
As of March 2015 (the most recent figures) 80 multinationals had registered with the SARS digital tax system – a number that the South African tax authorities were reportedly very satisfied with.
So, what e-services are in scope for VAT in South Africa?
For foreign suppliers the South African e-services definition includes the following:
- Educational services, if the supplier is not regulated by an educational authority in its own country, e.g. distance teaching programmes, internet-based courses, and webinars (live and recorded)
- Games and games of chance, internet-based games, multi-player role-playing games, and interactive games of chance
- Electronic betting or wagering, where this constitutes the acceptance of a bet or a wager on the outcome of a race or any other event or occurrence
- The supply of an internet-based auction service facility
- Miscellaneous services such as e-books; audio-visual content; the download of still digital images (e.g. desktop theme), and downloaded music.
- Subscription services to blogs, journals, magazines, newspapers, games, websites, etc.
For those familiar with the European Union’s VAT rules on the cross-border supply of digital services the inclusion of live webinars as an e-service will pique interest. In the EU live webinars are not included as digital services (e-services), in the South African legislation they are.
How do I file and register for VAT in South Africa?
Registration for South African VAT must be done by downloading a copy of the VAT101 form, available from the SARS website, completing and signing the VAT101, which must then be emailed together with the supporting documents to a dedicated SARS email address here.
The Commissioner will process the VAT101 and determine the date from which a foreign entity of electronic services (FESE) is required to commence charging South African VAT, at 14%.
Once the VAT registration is finalised the Commissioner will notify the FESE of the successful VAT registration by emailing the VAT103I (notice of registration).
The FESE must register as an eFiler. Registration as an eFiler will enable the FESE to file VAT201s and make VAT payments from outside South Africa.
For more information on how to register as an eFiler please visit the SARS website.
How do I activate the South Africa tax region in Taxamo?
Follow these steps to activate support for the South Africa tax region in your Taxamo account (get started here):
Log in to your Taxamo merchant portal account
Navigate to My Account > Tax Regions
Select South Africa from the tabs on the left
Enter your South Africa tax registration number (required if you use Taxamo invoices)
If you are a foreign supplier, you do not need to tick the checkbox for domestic VAT
Under Activate / Deactivate Region, select the period you wish to enable the region from. Enabled for immediate or Enable for a date range.
You can enabled in Test mode first and then Live mode
If you cannot access ‘Live’ mode for this region, please ensure you are on a plan that supports more than one tax region.
PLEASE REMEMBER THAT THIS INFORMATION HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT PRESENTED AS SPECIFIC TAX OR LEGAL ADVICE. ALWAYS CONSULT A QUALIFIED TAX OR LEGAL ADVISOR BEFORE TAKING ANY ACTION BASED ON THIS INFORMATION. VERTEX INC. ACCEPTS NO LIABILITY FOR ANY LOSS RESULTING FROM ANY PERSON ACTING OR REFRAINING FROM ACTION AS A RESULT OF THIS INFORMATION.