Rev­enue Ser­vice says e-mu­sic is a tax­ing busi­ness

Mail & Guardian - - Business -

It’s not just global mu­sic stars: tax agen­cies are also grap­pling with how to get rev­enue from these off­shore elec­tronic ser­vice providers.

There are cur­rently more than 250 elec­tronic ser­vice providers reg­is­tered with the South African Rev­enue Ser­vice, which said re­vised reg­u­la­tions, ex­pected to come into ef­fect in April 2019, would broaden the scope of elec­tronic ser­vices.

“This will in­crease the val­ueadded tax base of elec­tronic ser­vice sup­pli­ers, in that most off­shore elec­tronic ser­vices sup­pli­ers will be re­quired to reg­is­ter for VAT where the to­tal value of elec­tronic ser­vices sup­plied in South Africa ex­ceeds R1-mil­lion per an­num,” Sars said.

Sars charges VAT on the op­er­a­tions of for­eign elec­tronic ser­vice providers that pro­vide ser­vices that ex­ceed R50 000 a year. These busi­nesses also need to meet two of the fol­low­ing con­di­tions: pro­vid­ing ser­vices to South African res­i­dents; the re­cip­i­ent must have an ad­dress in the coun­try; and payment for the ser­vice should be from a South African bank ac­count.

Sars said de­ter­min­ing in­come tax for digital com­pa­nies posed unique chal­lenges be­cause most of these com­pa­nies were not tax res­i­dents of South Africa, in that they were not in­cor­po­rated or had their place of man­age­ment in the coun­try.

Dis­cus­sions are tak­ing place glob­ally on how to best to tax the dig­i­talised econ­omy. The Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment and the G20 In­clu­sive Frame­work pub­lished an in­terim re­port ear­lier this year on the chal­lenges that have come with tax­ing com­pa­nies in a digital era.

Sars said it was mon­i­tor­ing the work of these or­gan­i­sa­tions.

“It is an­tic­i­pated that, upon pub­li­ca­tion of a fi­nal ver­sion of the re­port, ex­pected by 2020, South Africa will be in a po­si­tion to adopt some of the re­port’s rec­om­men­da­tions,” Sars said. — Te­bogo Tsh­wane

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