We already know that South Africa’s set to be hit by a new taxation on digital goods purchased from online stores based outside of of South Africa. This means your Steam PSN, Xbox Live, Google Play and iTunes purchases are set to increase – but we also know that we’ve been given a two month reprieve. It’s the calm before the storm. Unfortunately, as we told you yesterday, things are set to get worse.
When the Treasury first announced the new taxation it did so via a statement that used some rather particular wording to explain the new Electronic Services Regulations.
“This announcement was made against the backdrop of efforts, both internationally and locally, to bring cross border e-commerce (specifically the digital economy) into the VAT regime,” The Treasury said in a statement.
“The current application of VAT on imports does not lend itself to the effective enforcement on imported services or e-commerce where no border posts (or parcel delivery agents, e.g. the Post Office) can perform the function as collecting agents, as is the case with physical goods.”
“The net result is that the local consumers can buy imported digital products without paying VAT. This outcome not only places local suppliers of digital services at a competitive disadvantage (compared to suppliers from abroad) but also results in a loss of revenue for the fiscus.”
Some of you, even yesterday, noticed how fiddly the wording was – as it hinted that not only would VAT be levied against digital imports, but they’d also be subject to customs duties. We can confirm this to be true – and it’s the reason the tax was delayed in the first place; so that both VAT and customs could be applied on your digital stores.
“What we’ve noticed is very positive growth of digital software purchases over the last four or five years, especially video games. While physical copies of games have increased the amount of units sold and shipped, our e-business section within SARS have also kept an eye on the e-commerce side of the industry,” said SARS Customs and Excise spokesperson Undida Isidenge in a press statement.
“Despite the fact that these are bought through digital platforms, that data that is transferred is still coming from overseas sources. That is a lot of revenue that has not been taxed with the relevant duties applied.”
“The free ride is over. When you import physical goods, you pay import duties VAT. These levies go towards building our country and strengthening our economy. People purchasing luxury items like games need to contribute as well. There have been millions lost in unpaid duties and taxes, something that SARS needs to address,” said Isidenge.
“Customs duties are imposed by the Customs and Excise Act 91 of 1964. They are levied on imported goods with the aim of raising revenue and protecting the local market. With the new Electronic Services Regulations that are in effect from June 1, 2014 as precedent, we have been able to amend the Customs and Excise Act No. 91 of 1964. As such, we have made provision to charge for Ad Valorem products as defined by the act.”
“By charging customs duties and VAT on digital goods, the gaming community can finally give back to South Africa for being allowed the freedom to enjoy their little hobby,” Isidenge said.
So there you have it. Not only are your games, movies and music set to increase by the 14% stipulated by the current VAT nonsense, but they’ll also be subject to customs duties. On digital goods. Honestly, I give up.
Yes, yes – it was an April Fools’ joke that we did in cahoots with the chaps at Mygaming.
Last Updated: April 1, 2014