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Small, Medium and Micro-sized Enterprises (SMMEs) may find South Africa’s complex tax laws to be somewhat challenging. To add to the complications, at the end of January 2014, the National Treasury rolled out a new legislation on electronic services.

Now, South Africa’s 14% VAT will extend to all digital products and services; both local and international goods will be affected by the increase. The change comes into effect on 1 June 2014, and it will impact the amount of money businesses spend on online services.

But how will it affect my company?

This new development will make most digital products more expensive as VAT will now be added to the original price. It will affect a wide list of items, such as:

  • Distance learning programmes
  • Education webcasts
  • Electronic betting and gambling
  • Games
  • Internet-based courses
  • Maintenance services
  • Webinars

In addition to services, online content will also be taxed. Numerous products that you’re used to buying VAT-free will now come with the added amount. These include:

  • E-books
  • Films
  • Music
  • Software
  • Images

Subscription services, such as journals, blogs, newspapers, and social networking facilities, will also be taxed.

What would I be required to do?

Essentially, this new legislation will push up the price of goods. However, even though this may affect the SARS tax rate in 2014, these digital items will still be cheaper than their equivalents in brick and mortar shops.

Although this new regulation is on its way to being implemented, tax changes associated with e-commerce focus on the challenges of executing them online. This means that if you produce taxable supplies in South Africa, you’ll soon be required to register as a vendor with SARS.

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