Home Entertainment A new South African tax on Netflix and other online services could see prices increase

A new South African tax on Netflix and other online services could see prices increase

2 min read
61

Netflix

It may not be cheap, but for the majority of what’s available, South Africans have a pretty good market for online subscriptions to a wide variety of media. Spotify is a brilliant platform for the best music around, Netflix continues to make regular TV feel like a lumbering dinosaur that has tripped into a tar pit and the Xbox Game Pass service is a value for money gaming buffet.

Not cheap, but plenty affordable for most households that want to grab a subscription. Well, mostly affordable as the National Treasury is looking to introduce a new regulation that would force international services to evaluate what they offer and reclassify themselves as an electronic service. The takeaway here, is that doing so will mean that these companies will have to register for VAT in South Africa, which likely means that consumers will be paying extra at the end of the day for their subscription of choice.

“What is envisaged by the definition is that the services being supplied are essentially automated and involve minimal human intervention and are impossible to ensure in the absence of information technology,” VAT expert Seelan Moonsamy from multinational law firm Baker & McKenzie said to BusinessTech.

Only a limited number of services that may be provided by the above means are excluded from the definition of electronic services, namely educational services regulated in the export country of the foreign service provider, and telecommunication services.

As for what could be reclassified as an electronic service? Pretty much everything with an online component:

  • Software subscription services;
  • The use of software by an entity in South Africa provided electronically by its holding company situated abroad (unless the exclusion applies);
  • Broadcasting;
  • Cloud computing;
  • Advertising services;
  • Gaming;
  • Any reservation services made via an online platform, etc.

“If these companies deliver its services by electronic means and the total value of its services exceed R1 million on a rolling 12 month period they will have to register,” Moonsamy  added.

The customer would ultimately bear the value-added tax in the form of higher prices as VAT is – in economic parlance – a consumption tax. I imagine that behemoths like Amazon and Google would still remain very competitive based on their ability to price discount, so their likely VAT registration for electronic services would not have any major impact on their ability to attract customers and their revenues.

The newly amended regulation will go live next year on April 1, and is unfortunately not a scheduled April Fool’s joke.

Last Updated: November 29, 2018

61 Comments

  1. Fleecing 101 right here.

    What are the odds that this could cause Netflix to pull out of SA?

    Reply

    • Pariah

      November 29, 2018 at 10:01

      If this was for their expense it would be possible, but all it’ll mean is 15% more cost for us.

      And while I agree with Gavin’s point, I also think the SA government needs to get fucked. Wasting our tax money, taxing us more and more, and yet billions in wasteful expenditure just keep popping up.

      Reply

      • HvR

        November 29, 2018 at 10:12

        The problem is not the 15%, they now need register with SARS, that means setup South African accounts, registering the company in South Africa, BEE laws, keep an office here etc etc etc etc

        That is hugely expensive, takes months if not years and in a lot of cases a huge pain.

        While I think Netlfix have a big enough subscriber here that they will do it it WILL stop other companies from providing their services to South Africa,

        Reply

        • Pariah

          November 29, 2018 at 10:39

          So they don’t have to open their own offices, they only need to appoint a local vendor. The local bank account is however a requirement. They don’t need to comply with BEE laws unless they want that classification, and the legislation makes no mention of requiring local registration. There are explicit clauses for non-resident business who supply e-services, so the only 2 requirement are appointing a local vendor, and having a local bank account.

          Neither of those are major deterrents for subscription services, really.

          Reply

          • HvR

            November 29, 2018 at 11:09

            Having that local bank account it where a lot of the red tape starts.

            I’m in no way clued up in company regulations and law but know for bank account you need CIPC registration which as whole lot of requirements in itself. And as soon as they have a local representation in country they become subject to 101 other regulations like the FPB. All of this has a knock on effect of expenditures for the company

            Anyways the proof is in our direct foreign investment figures, doing business in South Africa is hard and new entrants to the market will rather first do business in the rest of Africa where most of the time it is way easier and push South Africa down on the roll out list.

      • Gr8_Balls_o_Fire

        November 29, 2018 at 12:28

        This is not exclusive to South Africa, as much as we’d like to take pride in corruption being our number 1 skill.. We’re nowhere near the most corrupt countries in the world.

        Reply

  2. Johann

    November 29, 2018 at 09:17

    Actually hope they do pull out of SA. This is just another money making scheme so that they can spend it on themselves

    Reply

  3. SagatatiaRZA

    November 29, 2018 at 09:27

    My family uses my Netflix account which I signed up for here in Korea. VPN boys, don’t give them more BMW money you know not a single cent will come back to you.

    Reply

  4. kieker

    November 29, 2018 at 09:35

    Time to get back to ye olde VPN. Such a shame, now I’ll have to move my laptop with me every time i want to watch Friends on my TV in the living room.

    Reply

    • Magoo

      November 29, 2018 at 11:09

      Do your friends know that you’re watching them? :S

      Reply

      • kieker

        November 29, 2018 at 11:14

        Shh…No, but my Daredevil and Castlevania does XD

        Reply

    • geel slang

      November 29, 2018 at 15:05

      Netfix detects my VPN and wont allow playback while activated

      Reply

      • kieker

        November 29, 2018 at 15:08

        damn, back to piracy then ¯_(ツ)_/¯. I have no problem paying the content providers for the things I enjoy, but it annoys me when I already pay a boatload of tax, and then there are more taxes still.

        Reply

  5. HvR

    November 29, 2018 at 09:44

    Nvermind Netflix, that gaming one has me worried.

    What are the implications? When is something classified as paid service, when you pay for the game not a monthly fee, when there any kind of transactions possible?

    Could mean no more SA servers or even blocking access to international serves? Since registering for VAT means you have to reigster the company which is a HUGE PITA for companies in South Africa and not something any company is going to do for a few 1000 game owners.

    Reply

    • Kromas

      November 29, 2018 at 10:09

      Pc gaming won’t be hit hard cause we have very little subbed services. Console gamers might get screwed though.

      Reply

      • HvR

        November 29, 2018 at 10:12

        Except they say income from services and not subscription services. That is very broad definition.

        Also ANC government is very quick and good at quietly introducing amendments to expand laws once they are on the books.

        Reply

        • Kromas

          November 29, 2018 at 10:35

          I agree but once off on a R50 steam sale is much easier to handle than a monthly PS sub.

          Reply

  6. Gavin Mannion

    November 29, 2018 at 09:47

    Unpopular opinion… more countries need to start taxing these global streaming services and IT companies as all the income we spend on them is going straight into the US bank accounts and out of our country.

    Netflix, Facebook, Google, Apple and Amazon are ripping off the world while enriching themselves and America

    Reply

    • HvR

      November 29, 2018 at 10:07

      You need to add Apple to that list 🙂

      Also they are actually not enriching the US, less than 10% IIRC of their income goes back into the US it is kept and manage by HUGE hedgefunds like Braeburn Capital in accounts and safe investments in various small rich countries around the world where they 0 or close to 0% tax on it.

      Reply

    • HvR

      November 29, 2018 at 10:07

      You need to add Apple to that list 🙂

      Also they are actually not enriching the US, less than 10% IIRC of their income goes back into the US it is kept and manage by HUGE hedgefunds like Braeburn Capital in accounts and safe investments in various small rich countries around the world where they pay 0 or close to 0% tax on it.

      Reply

      • Gavin Mannion

        November 29, 2018 at 10:33

        Apple added…

        It may not enrich the government directly via taxes but the employees and hedge fund managers spend their massive salaries on property and goods in the US

        Reply

    • Kromas

      November 29, 2018 at 10:07

      Unpopular response. The money will come out of our pockets. Good thing I am a PC gamer. 15% increase in PS and xbox subs are going to hurt.

      Reply

      • Gavin Mannion

        November 29, 2018 at 10:33

        Steam charges vat now though so not sure you are saving much

        Reply

        • Kromas

          November 29, 2018 at 10:35

          True but that is a once off purchase and also I only buy steam sales mostly. Subs are subs. the only sub I have is wow and I am sorta thinking of stopping that.

          Reply

  7. Magoo

    November 29, 2018 at 10:17

    This would be a good thing, especially since Zuma’s ousting and the governments new ambitions which sorely lack in funds.

    But we all know exactly where that money’s going. I can picture them standing under a “tax tap” with buckets, waiting for it to be opened.

    Reply

  8. Original Heretic

    November 29, 2018 at 10:35

  9. RinceThis

    November 29, 2018 at 10:47

    I am not sure why people would think that American companies can broadcast stuff in other countries and not pay tax?

    Reply

    • Kromas

      November 29, 2018 at 10:49

      The more interesting question is add services like youtube won’t pay tax and yet will be raking in dosh way more than netflix in my opinion.

      Reply

      • Pariah

        November 29, 2018 at 12:52

        We don’t pay to use YouTube though. VAT only applies to services or products that cost us, the consumers, money.

        Reply

        • RinceThis

          November 29, 2018 at 15:56

          Good point. Though Youtube Red is a paid service.

          Reply

          • G8crasha

            November 29, 2018 at 15:59

            Which I would be interested to enjoy in SA if it were officially available in SA>

          • Kromas

            November 29, 2018 at 16:03

            Not worth it…..,

            …. I heard from a friend. cough cough.

          • G8crasha

            November 29, 2018 at 17:07

            In truth, I tend to download most of my Youtube videos, so I avoid the irritating ads.

          • Pariah

            November 29, 2018 at 23:13

            I use adblocker and exempt specific sites like CH which deserve the support.

          • RinceThis

            November 29, 2018 at 23:18

            Wow, even I use an adblocker on CH, fuck

          • Kromas

            November 30, 2018 at 06:18

            I don’t use an add blocker at all. If the adds are too much I stop using the site altogether.

          • RinceThis

            November 30, 2018 at 06:19

            Agreed. Which is why I am currently writing this on my favourite site, Mweb, FUCK AGAIN!

          • Pariah

            November 30, 2018 at 06:19

            The site has a lot more colour without it on. 😛

          • Magoo

            November 29, 2018 at 23:23

            I only exempt ads from http://www.lazygamer.net/

          • RinceThis

            November 29, 2018 at 17:07

            lol oh I have too 😉

        • Kromas

          November 29, 2018 at 15:56

          I understand the way tax works but I am saying that that add revenue is generated through me in South Africa watching an add before the main video. This generates money for them through American channels. It is basically a loophole.

          Reply

          • Pariah

            November 29, 2018 at 15:59

            No. Ad revenue is paid for by companies. If those companies do business in SA, then they are already paying tax, and are also exempt from VAT for paying for ad services. If those companies are not in SA, then the money never entered the country anyway.

            Your view does not cost you a cent.

          • Kromas

            November 29, 2018 at 16:03

            Yeah I was doing some fuzzy maths there.

          • RinceThis

            November 29, 2018 at 16:03

            stop with making sense! WTF happened to you!?

      • RinceThis

        November 29, 2018 at 12:52

        maybe they should?

        Reply

    • Pariah

      November 29, 2018 at 10:49

      Americans think a lot of themselves.

      Reply

    • G8crasha

      November 29, 2018 at 10:49

      How does one define broadcasting though? Is Netflix even a broadcaster in the sense of South African broadcasters like DStv and SABC?

      Reply

      • RinceThis

        November 29, 2018 at 10:50

        Mmm. Well they are making money from people in South Africa… People who sell things to people within South Africa must pay VAT, why not them?

        Reply

        • Pariah

          November 29, 2018 at 10:52

          Yeah, and there are specific clauses which cover e-services which include games and services like Twitch already. April 1 will add the rest.

          Reply

          • RinceThis

            November 29, 2018 at 10:54

            Yeah. I know in many EU countries they have to pay tax. Can’t be a buffet for them!

  10. G8crasha

    November 29, 2018 at 10:47

    It’ll still be cheaper than DStv most probably!

    Reply

    • RinceThis

      November 29, 2018 at 12:49

      oh absolutely! DSTV is nearly 1000 for the full package per month. Netflix is around 150 for the standard model.

      Reply

Leave a Reply

Your email address will not be published.

Check Also

Netflix Thickens the MOTU Plot with Another Show

So the plot thickens… It would seem that Netflix has another MOTU show in the works that r…