Netflix, Facebook, and Google will probably have a new tax to pay in SA – and that will hit consumers

Business Insider SA
(Instagram, @netflixsa)
(Instagram, @netflixsa)
  • The National Treasury will now require US-multinationals who render services in South Africa to pay VAT.
  • This means companies such as Netflix, Facebook and Google will be required to register for VAT, and pay the 15% VAT rate.
  • An attorney believes the new regulations will likely lead to price increases for consumers. 

Various US-multinationals such as Netflix, Facebook, and Google will soon be compelled to pay value-added tax (VAT) in South Africa.

This after the National Treasury published new regulations specifically for electronic services which expanded the meaning of “electronic services” to “any services supplied by means of an electronic agent, electronic communication or the internet for any consideration". 

That means any electronic services from another country provided in South Africa - such as such as online advertising, online courses, online consulting services, software subscriptions, website hosting, streaming services, online games, podcasts and publications – will be subject to 15% VAT, Natalie Macdonald Govender, associate at Bisset Boehmke McBlain attorneys, said.

Educational services rendered by an accredited body will, however, be VAT exempt.

The regulations are due to come into effect from April 1, 2019.

Also read: Netflix is 17% more expensive in SA than in the US – if you count the titles you can watch

Companies such as Netflix, Facebook and Google will have now have to register for VAT in South Africa, if they haven’t yet, as well as account for VAT or risk prosecution, Govender said.

The burden of the additional VAT will likely be carried by the consumer in a similar fashion to the sugar tax which resulted in price increases, she said.

“It can naturally be expected the foreign service providers would not ideally want to take a cut out of their profits, but will probably increase their prices (such as subscription fees etc) to assist in recovering some of the profits that could be lost as a result of the imposition of VAT,” Govender told Business Insider South Africa.

She said tax authorities worldwide are increasingly using advanced technology to assist in revenue collection, and spot tax avoiders.

"Countries in some cases agree to mutually co-operate with each other (including exchanges of information pertaining to taxpayers) and share information with each other."

"As technology also improves, it will become easier for non-compliant entities to be identified."

Govender said companies who fail to register and pay for VAT where required will be liable to penalties and interest.

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