The South African Revenue Service (SARS) is establishing a special unit to review digital services VAT compliance.
Using information derived from South Africa’s central bank and local businesses, SARS plans to more effectively detect and, potentially, penalise foreign suppliers of electronic services that do not register for VAT.
Creating a level VAT playing field
There are compelling reasons for a country’s tax authority to pay special attention to potential digital services VAT evasion. Of course, stringent enforcement can enhance revenue collection. But there’s another important factor.
In many cases, digital services VAT on foreign vendors is designed, in part, to create a more equal playing field for local and foreign entities that supply services to customers in a country. Ensuring that nonresident suppliers register and account for VAT thus helps realise that policy goal.
Digital Services VAT in South Africa
South African broadened the definition of an applicable digital service in 2020. In addition to services such as streaming, online news services and social media, digital services VAT extended to online advertising, consulting, gaming and other online services.
The range of applicable electronic services is thus fairly broad. If you are uncertain about your digital services VAT obligations in South Africa, contact a VAT specialist for guidance.
Note also that the VAT registration threshold is R1 million per year.
Digital VAT: A significant revenue opportunity
South Africa’s digital VAT policy is broadly in line with global norms. Tax authorities are increasingly turning to VAT on electronic services, as digital services become central to the global economy.
The opportunities for raising revenue are substantial. For example, a recent IMF report found that digital services VAT on nonresident firms could raise revenue of between 0.04% and 0.11% of GDP in certain Asian countries.
Don’t take chances with global VAT compliance
As we can see, global tax authorities are starting to take digital services VAT compliance more seriously. Companies that fail to comply with digital VAT regulations therefore face potentially severe penalties. Authorities could even ban a company from operating in its jurisdiction.
But there’s good news. Vatglobal’s technology-driven solution makes global VAT compliance simple, efficient and cost-effective. Get in touch with Vatglobal for a simple solution to the complex problem of global VAT compliance. We’ll provide the expert advice and information you need to ensure you are always 100% compliant, everywhere you have an obligation.