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New South Africa tax on Netflix and other online services could see price increases – Critical Impact

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It may not be cheap, but most of the Southwest Africans available are quite good markets for online subscriptions to various media. Spotify is a wonderful platform for the best music environment, Netflix continues to play regular television as well as a proud dinosaur that has entered the tar pit and the Xbox Game Pass service is a money-game buffet.

Not cheap, but more accessible to many households who want to grab a subscription. Good, above all, is acceptable because the Treasury's objective is to introduce a new regulation that would force international services to evaluate its offer and reclassify itself as an electronic service. This means that these companies will have to register as a VAT payer in South Africa, which probably means that consumers will pay an additional subscription fee after the end of the day.

"What the definition says is that the services provided are essentially intelligent and involve minimal human intervention and can not be ensured if there is no information technology," said Welchman, a tax expert at Seoul Moonshamy from the Baker & McKenzie Multinational Law Firm, for BusinessTech.

The definition of electronic services, namely, educational services, regulated by the foreign service provider's export country, and telecommunications services, are excluded from a limited number of services that can be provided by the abovementioned means.

What about what could be reclassified as an electronic service? Quite everything with an online component:

  • Software subscription services;
  • The use of South African company software provided electronically by a foreign exchange holding company (unless exclusion applies);
  • Broadcast;
  • Cloud computing;
  • Advertising services;
  • Gaming;
  • All booking services made through an online platform, etc.

"If these companies will provide their services electronically and the total value of the services they provide exceeds R1 million over the continuous period of 12 months, they will have to register," Moonsamy added.

After all, the customer would have to pay value added tax in the form of higher prices, since VAT – in economic terms – is a consumption tax. I think that, just like Amazon and Google, they would still be very competitive on the basis of their ability to discounted, so their potential VAT registration for electronic services would not significantly affect their ability to attract customers and their revenues.

The newly amended regulation will take place on April 1 next year and, unfortunately, there is no April focus joke.

Last Updated: November 29, 2018

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