South Africa – VAT Alert – Budget speech – Proposed amendment to include software supplies to the Electronic Services Regulation

Following the recent National Budget speech in South Africa, various proposals were tabled for consideration including a proposed amendment to the Electronic Services Regulation No. 37489, dated 28 March 2014.

As previously reported here the National Treasury published regulations on 28 March 2014, prescribing what constituted “electronic services” for South African Value Added Tax purposes.

The definition of “electronic services” covers the following broad categories:

  • educational services;
  • games and games of chance;
  • internet based auction service;
  • miscellaneous services; and
  • subscription services.

It is now proposed that the supply of software be included as an electronic service. The proposal seeks to update the Regulations to specifically include software.

The proposed tax amendment in the budget speech reads as follows:

“The regulations prescribing electronic services will be updated to include software and other electronic services and to remove some uncertainties.”

You recall that software which was defined to mean application software, systems software, plugins or any updates to software was initially included in the draft Regulation issued in January 2014 and subsequently excluded in the final Regulation. As a result, foreign suppliers of software (which did not fall in any of the other categories) were not required to register for VAT in South Africa.

We understand that the proposal is meant to further address the issues on Base Erosion and Profit Shifting (BEPS). However, it is uncertain when the proposed amendment will come into effect.

We will follow the developments closely and keep you posted.

If you have any questions please contact Gerard Soverall or Louis Carney from PwC South Africa.


About Sophie Claessens

Senior Tax Manager PricewaterhouseCoopers Tax Consultants Belgium email: Mobile: +32 473 91 05 67 Office: +32 3 259 3169

Sophie Claessens is an international VAT advisor, based in Antwerp, Belgium, with a particular focus on business-to-consumer industries, including telecommunications, media, internet and e-commerce. She supports major industry players on sector-specific issues, including VAT compliance at both an operations and strategic level, and is directly involved in policy work for businesses in these industries, both at the Belgian level and at the level of the European Commission. She is responsible for indirect taxes in the communications sector at PwC Belgium and is a driver of PwC's Business Working Group on the EU 2015 VAT changes. She has authored articles for publication in Belgian and international tax journals.