South Africa | VAT Rate Increase | Update on VAT rules for Non-resident Suppliers of e-Services

On 21st February 2018, the Minister of Finance announced the following amendments to South African VAT at the 2018 Budget speech:

As of April 1, 2018, the standard VAT rate will increase to 15% from 14%.
Businesses should ensure that their ERP systems are robust enough to manage the cross-over relating to the change in the standard VAT rate.

Draft regulations were issued that propose to widen the scope of non-resident supplies of electronic services subject to South African VAT.
Currently, the list of e-services supplied by non-residents that are subject to VAT such as games, internet-based auction services and subscription services is limited and generally affects B2C supplies.

The proposed amendments provide that the definition of electronic services is extended to incorporate all electronically supplied services, except for telecommunication services and educational services provided by public bodies. Since unlike many other jurisdictions, South African legislation does not differentiate between B2C and B2B supplies this means that more non-resident B2B suppliers may now be impacted and required to register.

Once enacted, the changes are expected to come into effect from October 1, 2018.