Attention all gamers, online media content consumers and anyone who buys anything on the net!
From 1st April 2014 (no, this isn’t a joke), government will begin taxing purchases made on the internet for digital or physical products under the new Electronic Services Regulations. There will be a 14% VAT levied on the purchase and anyone who makes products that fall under any of the categories outlined by treasury will have to add in 14% VAT from now on. If you’re purchasing games on Steam, consider buying them before the government tries to add VAT to your purchases. Hit the jump for more info.
Update:I have edited a section of this article to better explain how the new regulations affect consumers and overseas businesses. Although it appears that there may be a small financial incentive for businesses to register with SARS to pay VAT for their services rendered, it’s still a cost that will be passed on to us, the consumer.
The regulations that are coming into effect will be published soon by Finance Minister Pravin Gordhan for comment and may be altered before the proposed date if members of the public, private businesses and overseas brands make their case for changes to the regulations. Gordhan initially introduced the idea of adding VAT to purchases on the internet as government began to notice how much money swaps between overseas businesses and consumers on the net.
Note that if you’re already selling your wares on the net, you’re probably already adding VAT as local businesses are required by law to do so. This regulation change affects the purchase of products from overseas providers and may scare away some companies from web portals in South Africa.
In terms of the regulations, the additional VAT will also apply to any supplier of electronic services from an “export country” to any resident in South Africa, or where payment is made from a local bank. So those of you who use Amazon Web Services to host your website or run programs remotely, you’re going to have to add in a 14% increase every month to your bill.
What will be taxed? Here’s a brief list that covers the items that treasury is targeting.
distance teaching programmes;
internet-based education programmes; or
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
Which refers to technical support relating to
information system services; and
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.
Any subscription service to:
information system services;
social networking services;
web applications; or
How does it affect you?
Simply, if you’re using anything on the net that you have to pay for, you’re going to have to pay more now. Do you pay for a World of Warcraft, Xbox Live Gold or PS Plus subscription? Do you buy anything on the Playstation store or on Xbox Live? Do you buy music on iTunes? Do you use Paypal for online purchases? All of the companies who render these services to you now have to register with SARS to pay VAT and claim it back like many tax payers already do.
As a gamer who buys most of his games on sales and through Humble Bundle, this affects me quite a bit. If I were even to use Netflix in the future, I’d have to, under these regulations, pay more for the use of Unotelly and Netflix because the legislation moves the onus on paying VAT to the supplier of these services, who will no doubt include it in their price hikes to make up for the loss. If they are able to, they can also claim back from SARS later on.
This is a move that will no doubt generate more cash for treasury and the ANC, but it will stifle the supply of services and content in the country early in while companies get their act together if they want to retain, or grow, their local presence. If Apple refuses to allow VAT onto their music and movie services, government could be in the right to bar them from doing any business here at all, unless they add it into their price and charge us, the consumer, for this.
If you buy any digital services on the net, be prepared to pay more for them, or drop them completely in order to save more money. At the end of the day, this is money into the government’s pockets and once it’s there, there’s no telling where it goes. I hope that this starts a precedent for companies to open local branches in the country to render their services locally and help grow the economy, but who am I kidding? We’re a tiny blip on the international markets and it will be a long time before many companies consider this.