Electronics, gaming to be taxed in South Africa?

South Africa’s Minister of Finance Pravin Gordhan today announced that the National Treasury’s Electronic Services Regulations is open for public comment until 20 February.  Under the regulation, all electronics and games will be subject to 14% Value Added Tax (VAT).

“The publication follows the Minister of Finance’ announcement in the 2013 Budget that all foreign businesses supplying e-books, music and other digital services in South Africa will be required to register as Value Added Tax (VAT) vendors,” a statement from the National Treasury read.

Those who will be subjected to the regulation include Educational services such as distance teaching programmes and internet-based courses; the supply of any internet-based game, including electronic games, multiplayer role-playing games and interactive games; as well as the supply of any e-books, films, images and music.

“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 statement continued.

The detailed list includes:

Educational services

• distance teaching programmes;
• educational webcasts;
• internet-based courses;
• internet-based education programmes; or
• webinars,

Games and games of chance

• internet-based games, including any electronic game or multiplayer role-playing game;
• interactive games, such as games of chance, where the result is influenced by the skill of the player;
• electronic betting or wagering.

Information system services

Internet-based auction service

Maintenance services

Which refers to technical support relating to

• blogs;
• databases;
• information systems;
• information system services; and
• websites.

Online content

• e-books, which means any digitised content of any book or electronic publication;
• films, which means any broadcast, documentary home-made video, live streaming performance, movie, music video, program, television series, or video
• images, which means any desktop theme, photographic image, pictorial image, or screensaver,
• music, which means any audio clip, broadcast jingle, live streaming performance, ringtone, song, or sound effect,
• software, including apps, system software, or plugins, and any update to these programs.

Subscription services

Any subscription service to:

• blogs;
• databases;
• information system services;
• journals;
• magazines;
• newspapers;
• games;
• social networking services;
• webcasts;
• websites;
• web applications; or
• web series.

The Minister added that under the current regulations, “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.”

Charlie Fripp – Consumer Tech editor