Digital tax compliance solution for domestic and international VAT on e-services.
Global digital tax solution provider Taxamo, has further expanded its offering to digital service merchants by releasing support for both domestic and international South African VAT. Support for South Africa follows recent announcements by Taxamo to expand support for digital service merchants, wherever they sell. Taxamo’s solution already supports EU VAT in 28 European Union Member States, U.S. Sales & Use Tax, and Japanese Consumption Tax.
“The introduction of new digital taxation rules has been unprecedented, with 36 countries now actively enforcing place of consumption based taxation”, said John McCarthy, Taxamo CEO. “While similar in nature, digital tax rules vary by region and South Africa’s are unique in terms of qualifying sales thresholds, specific tax calculation requirements and data retention periods.’
Introduced to tackle lost revenue from the digital economy, the South African finance ministry implemented these rules in June 2014 to charge foreign suppliers VAT on electronic services. As of March 2015, a reported 80-100 companies had registered for the South African VAT scheme, with many of these being large multinational digital sellers.
In 2014, there were 15 million Internet users in South Africa, or 29% of the country’s population of 53 million. By 2019, there will be 27 million Internet users, or 50% of the South Africa’s projected population of 55 million. (Source: Population Division of the Dept. of Economic & Social Affairs of the United Nations).
Prior to the implementation of the rules, foreign suppliers could sell e-services to South African consumers without paying VAT, giving them sufficient advantage in pricing over domestic suppliers of the same products. Since the rules went live last year, a foreign supplier must be VAT registered if the value of its services, which it sells to South African consumers, exceeds the ZAR 50,000 (approx. $3,693) threshold. Domestic suppliers, however, have a ZAR 1 million (approx. $73,866) threshold before they must register.
Tax on digital sales was introduced in some U.S. States as far back as 2003 and on October 1, 2015, Japan became the 36th country to introduce new ‘place of supply’ tax rules. Similar EU VAT rules have been in place since January 2015 with several other regions, such as Australia and New Zealand, already announcing plans for digital tax laws to be introduced in 2016 and 2017. However, problems relating to merchants ability to comply have arisen as tax jurisdictions take unilateral approaches to legislation, forcing merchants who sell internationally to interpret complex pieces of legislation, and from this, design and maintain real time tax calculation solutions.
Note: Taxamo content is created for guidance only, please consult your local tax advisor for professional advice.