The National Treasury has published the Electronic Services Regulations for public comment.
The publication follows finance minister Pravin Gordhan's announcement in the 2013 budget that all foreign businesses supplying e-books, music and other digital services in SA will be required to register as value-added tax (VAT) vendors.
The National Treasury says the regulations - published today - are part of government's bid to bring cross border e-commerce (specifically the digital economy) into the VAT regime.
"The current application of VAT on imports does not lend itself to the effective enforcement on imported services or e-commerce where no border posts (or parcel delivery agents like the Post Office) can perform the function as collecting agents, as is the case with physical goods."
The result of this is that local consumers can buy imported digital products without paying VAT - placing local suppliers of digital services at a competitive disadvantage (compared to suppliers from abroad). It also results in a loss of revenue for the fiscus.
National Treasury says SA's VAT legislation was amended to bring the digital economy more comprehensively into the VAT net, and provides for the finance minister to issue regulations prescribing imported services that will be covered by the new electronic services definition in the VAT Act.
"These imported services will include the supply of e-books, e-music, e-films, software, images, games and games of chance, information system services, Internet-based auction services, maintenance services, educational services, and the supply of an Internet-based auction service facility."
The Electronic Services Regulations document is available on the National Treasury Web site, as well as the South African Revenue Service (SARS) Web site.
Written comments on the regulations can be submitted to the National Treasury via mpho.legote@treasury.gov.za or SARS via policycomments@sars.gov.za. The closing date for commentary is close of business on 20 February.
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