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Putting the VAT screws on imported goods bought online

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The public has until February 20 to make their input on the National Treasury’s Electronic Services Regulations.

In a statement on Thursday, National Treasury said the regulations have now been published for public comment.

The publication of the regulations follows on Finance Minister Pravin Gordhan’s announcement in the 2013 budget that all foreign businesses supplying e-books, music and other digital services in the country will be required to register as Value Added Tax (VAT) vendors.

“This announcement was made against the backdrop of efforts, both internationally and locally, 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, e.g. the Post Office) can perform the function as collecting agents, as is the case with physical goods.”

The net result is that the local consumers can buy imported digital products without paying VAT. This outcome not only places local suppliers of digital services at a competitive disadvantage compared to suppliers from abroad but also results in a loss of revenue for the fiscus, noted Treasury.

The VAT legislation was amended to bring the digital economy more comprehensively into the VAT net and provides for the minister to issue Regulations prescribing imported services that will be covered by the new electronic services definition in the VAT Act.

The Regulations are available on the National Treasury website (www.treasury.gov.za) and the South African Revenue Service website (www.sars.gov.za).

Written comments should be submitted to Mpho Legote on mpho.legote@treasury.gov.za and SARS email policycomments@sars.gov.za. – SAnews.gov.za

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Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.