In the case of perceived B2B transactions (the supply of computer software), the recipient importer accounts for VAT in terms of the reverse charge mechanism. Although it could be argued that cloud computing could fall under any of the "electronic services". 34 According to the use-and-consumption principle, the services must be taxed in the jurisdiction where the services are used and consumed.
See Treasury regulations prescribing electronic services for the purposes of the definition of “electronic services” in Division 1 of the Value Added Tax Act. 47 As regards the destination principle, consumer taxes are levied in the jurisdiction where the supply is made. In the case of the principle of origin, consumption taxes are calculated in the jurisdiction where the supply originates.
The way in which the place of supply rules are derived from reading together the cost determination and the definitions of 'electronic services', 'supplier' and 'undertaking' is confusing to foreign suppliers unfamiliar with South African legal provisions . system. 72 Paragraph (b)(vi) of Article 1 of the definition of “undertaking” of the VAT Act; see also Van Zyl. The VAT law does not determine who is liable for determining the place of residence of the recipient of “electronic services”.
From the wording of the VAT Act, it appears that it is the responsibility of the foreign supplier of "electronic services" to determine the recipient's place of residence.77 Establishing a recipient's place of residence creates an unnecessary administrative burden for foreign suppliers of.
2 4 Simplified registration of foreign vendors
When a foreign supplier of electronic services is registered, it must issue a VAT invoice to a recipient within 21 days of the date of supply.102 The invoice must contain the following information:103. Accordingly, where the foreign supplier of "electronic services" is registered for South African VAT but fails to collect and remit VAT, the South African consumer of "electronic services" becomes by default required to self-assess the transaction and pay VAT. 110 The authors' own experiment at the SARS office in Pretoria revealed that SARS officials are unaware of the reverse charge mechanism and were unable to process the authors'. 107 The definition of "international agreement" in s1 of the TAA, read with s 3(3), refers to international cooperation only in cases where a foreign jurisdiction requests the cooperation of SARS.
110 In terms of s 14(1) of the VAT law, the importer receiving imported services (including electronic services) must, within 30 days from the earliest payment for services or issuance of an invoice, submit a statement to the Commissioner of VAT. and pay VAT on the transaction. However, the customer should be aware that South African VAT will be imposed on the purchase price if South African VAT is applicable. While the concessions made by SARS to simplify the VAT registration of foreign suppliers of electronic services are in line with OECD guidelines, the Davis Tax Committee recommends that the registration process be closely monitored and regularly reviewed to ensure that it remains OECD compliant. simple registration instructions.117 Despite the simplified registration process, many foreign suppliers are still unaware of their obligations under the law.118.
In relation to the standard registration system, an online foreign business must apply for an ABN number. 119 ITZ refers to Australia to the exclusion of other territories that fall outside the scope of the GST. 2 4 4 The simplified VAT registration of foreign suppliers of electronic services provided in the European Union.
A foreign supplier providing electronically supplied services can register and account for VAT in the jurisdiction of the identified customer if the online company does not have a permanent establishment in that jurisdiction.127 This mechanism, known as Mini One Stop Shop (MOSS), is optional; . Upon registration in an EU country, the online company reports the transaction to the competent tax authorities and pays the VAT owed via the online portal in the country in which the customer's identity was established. 129. The requirement for a fixed or permanent business unit could arise from the need to establish identity.
126 Parliament of the Commonwealth of Australia “Explanatory Memorandum to the Taxation and Superannuation Laws Amendment Bill 2016” http://parlinfo.aph.gov.au/parlInfo/. Mikutiené states that the fixed unit concept can be used to determine the place of supply for B2B as well as B2C transactions.134 According to Mikutiené, the fixed unit concept “strongly affects the right of member states to tax supplies and affects cash flow . both of Member States and of businesses that supply and receive cross-border services". 135. According to the European Commission, one of the main challenges when using MOSS is the compliance costs that businesses face when transacting in different countries.138 Online businesses have to deal with up to 28 different countries when transacting with customers in the EU.
134 Mikutiné “The Preferred Treatment of the Fixed Establishment in European VAT” 2014 3 World Journal of VAT/GST Law 166 166. 143 Krinis VAT challenges of the digital economy: an EU perspective (Master of Accounting dissertation, Universidade do Minho Portugal) 2016 66.
In terms of the Decree, a foreign supplier of electronic services will not be required to register for VAT if the intermediary is already registered for VAT and the foreign supplier has entered into an agreement with the intermediary where the latter will calculate and pay VAT -in. to SARS.168. The South African Institute of Tax Practitioners (SAIT) said in its submissions to SARS that the Ruling allows South African intermediaries to take responsibility for VAT instead of foreign suppliers of "electronic services".171 SAIT also submitted that the decision is based on SARS discretionary power in terms of Article 72172 of the VAT Law.173 The use of. 171 SAIT letter to the South African Revenue Service regarding the Draft General Binding Ruling on Electronic Services Supplied by Intermediaries (VAT), dated 25 April 2016, [online] www.thesait.org.za/ resource/resmgr/2016_Submissions/ 25_April_2016_- _SAIT_ BGR_Elect.pdf (access.
An "intermediary" is defined as "a person who facilitates the supply of electronic services provided by the supplier of electronic services and who is responsible for issuing invoices and collecting payment for the supply".176 The effect of the change is that intermediaries or platforms that facilitate the supply of "electronic services" (on behalf of a foreign supplier) and who are responsible for invoicing and collecting payments, must register as a VAT vendor in South Africa. Although the amendment is in line with the recommendations of OECD working group 9 (WP9),177 some of the OECD recommendations were not incorporated. 173 See SAIT letter to the South African Revenue Service regarding the Draft General Binding Ruling on Electronic Services Supplied by Intermediaries (VAT), dated 25 April 2016, [online] www.thesait.org.za/ resource/resmgr/2016_Submissions/ 25_April_2016_- _SAIT_ BGR_Elect.pdf (access.
In the absence of limited liability rules, the authors argue that penalties for non-compliance and understatement under the TAA may apply. It is argued that where an intermediary has verified that the underlying supplier has provided consistent information regarding the value of the "electronic services", billing, place and time of delivery, the intermediary should be deemed to have waived the rights imposed to have confessed. based on the VAT law. In particular, Van Zyl and Schulze argue that collecting VAT on the supply of digital goods through the registration mechanism is ineffective if there is no cooperation between existing states.181 Moreover, the reverse charge mechanism relies solely on the integrity of the recipient of imported services.
The reason for this is that the taxpayer is either unaware of the obligation to pay VAT or perceives tax collection as an unnecessary burden and time-consuming. Such dependence on consumers underlines the shortcomings of the reverse charge mechanism to collect VAT on imported services. According to the authors, the value of the majority of individual transactions that escape the VAT net is too insignificant for SARS to monitor individual consumers and levy additional taxes and penalties.
The indicators for identifying a customer recipient as applied in Australia are significantly broader than the indicators applied in terms of the South African VAT Act. Despite the introduction of the proxy in the VAT law, it appears that the burden is on foreign suppliers of digital goods to ascertain the jurisdiction of the consumer recipient of the digital goods. If other states are reluctant or unwilling to cooperate, then the efficiency of the registration mechanism becomes weak.
