Digital Tax for South Africans

Small, Medium and Micro-sized Enterprises (SMMEs) may find South Africa’s complex tax laws to be somewhat challenging. To add to the complications, at the end of January 2014, the National Treasury rolled out a new legislation on electronic services.

Now, South Africa’s 14% VAT will extend to all digital products and services; both local and international goods will be affected by the increase. The change comes into effect on 1 June 2014, and it will impact the amount of money businesses spend on online services.

But how will it affect my company?

This new development will make most digital products more expensive as VAT will now be added to the original price. It will affect a wide list of items, such as:

  • Distance learning programmes
  • Education webcasts
  • Electronic betting and gambling
  • Games
  • Internet-based courses
  • Maintenance services
  • Webinars

In addition to services, online content will also be taxed. Numerous products that you’re used to buying VAT-free will now come with the added amount. These include:

  • E-books
  • Films
  • Music
  • Software
  • Images

Subscription services, such as journals, blogs, newspapers, and social networking facilities, will also be taxed.

What would I be required to do?

Essentially, this new legislation will push up the price of goods. However, even though this may affect the SARS tax rate in 2014, these digital items will still be cheaper than their equivalents in brick and mortar shops.

Although this new regulation is on its way to being implemented, tax changes associated with e-commerce focus on the challenges of executing them online. This means that if you produce taxable supplies in South Africa, you’ll soon be required to register as a vendor with SARS.

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Personal Information
Where a party receives any personal information (“PI”) related to the other party, the party who receives the PI, will comply with and have adequate measures in place to ensure that its employees, agents, subsidiaries and representatives comply with the provisions and obligations contained in the Protection of Personal Information Act, No. 4 of 2013. Any PI pertaining to one party which is required by the other party, will only be used by that other party for the purposes of this contract and will not be further processed or disclosed without the written consent of the latter and the recipient of that PI will take all reasonable precautions to preserve the integrity and prevent any corruption or loss, damage or destruction of the PI. If and when the contract is terminated, each party will, save to the extent that it is required to do otherwise by any applicable law, erase or cause to be erased, all PI and all copies of any part of the PI relating to the other party”.