(Instagram, @ Netflixsa)
- The National Treasury will now require US multinationals that provide services in South Africa to pay VAT.
- This means that companies like Netflix, Facebook and Google must register in the VAT and pay the VAT rate of 15%.
- A lawyer believes that the new regulations will probably lead to price increases for consumers.
Several US multinational companies such as Netflix, Facebook and Google will soon be forced to pay value added taxes (VAT) in South Africa.
This is after the National Treasury has published new regulations for electronic services that extend the meaning of "electronic services" to "any service provided through an electronic agent, electronic communication or the Internet for any consideration".
This means that any electronic service from another country provided in South Africa, such as online advertising, online courses, online consulting services, software subscriptions, website hosting, streaming services, games online, podcasts and publications – will be subject to 15% VAT, Natalie Macdonald Govender, associated with Bisset Boehmke McBlain's lawyers, said.
However, educational services provided by an accredited body will be exempt from VAT.
The regulations must enter into force as of April 1, 2019.
Companies like Netflix, Facebook and Google will have to register for VAT in South Africa, if they have not yet done so, as well as telling the income of the VAT or the risk, said Govender.
The additional VAT charge will probably be transported by the consumer in a manner similar to the sugar tax that caused price increases, he said.
"Of course, it can be expected that foreign service providers will not ideally cut their profits, but will probably increase their prices (such as subscription fees, etc.) to help recover some of the benefits that could be lost as a result of VAT taxation, "Govender told Business Insider, South Africa.
She said tax authorities around the world are increasingly using advanced technology to help raise revenue and avoid taxes.
"Countries in some cases agree to mutually cooperate among them (including exchanges of information about taxpayers) and share information among themselves."
"As technology improves, it will be easier to identify non-compatible entities."
Govender said that companies that do not register and pay VAT when needed will be responsible for penalties and interests.
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