South Africa l Postpones Introduction of VAT on Non-resident Supplies of Electronic Services to April 2019

On 14th March 2018, we reported that non-resident supplies of electronic services would be subject to South African VAT from 1st October 2018.

However, as a result of consultation between stakeholders and the National Treasury on the draft regulations, this launch date is postponed until 1st April 2019, to give businesses more time to prepare for the regime change.

Moreover, the applicable VAT registration threshold is expected to increase from ZAR 50,000 to ZAR 1 million, equalising it with the VAT registration threshold for domestic companies.

Currently, a limited list of electronic services, are subject to South African VAT. Examples include games and subscription services.  The draft regulations published on 21st February of this year, expanded this definition to effectively cover all electronically supplied services excluding telecommunication services and educational services provided by public bodies.

Under the proposed rules, intermediaries / operators of digital platforms enabling the supply of electronic services; and that have responsibility for the invoice issuance and VAT collection, may also be required to register as suppliers and collect VAT due on their sales.

The final regulations have yet to be released.