National Treasury on Friday published the final regulations giving effect to the 2013 amendments of the Value-added Tax Act, changing the way certain imported electronics will be taxed in future.

The implementation of the regulations had been postponed by two months to June 1 to allow businesses sufficient time to get their systems ready, National Treasury said in a statement, adding that the South African Revenue Service (Sars) was, however, ready to start registering foreign-based supplies of electronic services from April 7.

National Treasury also noted that the publication of the final regulations followed a consultation process, undertaken after National Treasury published the draft regulations that provided a list of electronic services that would be included under the new provisions, for public comment on January 30.

Fifty written comments were received from business groupings, companies, private individuals, representative organisations and tax advisers.

National Treasury and Sars hosted a stakeholder workshop on February 20 to discuss these comments, with a follow-up information session having been held on March 19.

The main concern raised by businesses and tax advisers was that the scope of the regulations was too wide, as it included certain types of electronic services that were predominantly of a business-to-business nature.

“As this is the first step in the implementation of the taxation of electronic services, a decision was taken to reduce the scope and exclude certain e-services from this regulations. It should be noted that imported services not specifically included in the regulations are still subject to value-added tax (VAT),” National Treasury said.

It also noted that a number of submissions wrongly noted that the amendment was imposing a new tax.

“This is not the case, as the regulations merely changes the tax liability from the importer of the service to the foreign supplier to address concerns about noncompliance in terms of the current rules and to level the playing field between local suppliers of e-services and foreign suppliers,” National Treasury said.

Further, Sars would also provide for a streamlined VAT registration and administrative process that would significantly reduce the compliance burden for businesses.

This included a provision that foreign electronic suppliers would not be required to open a South African bank account.

National Treasury further noted that it, in conjunction with Sars, was also reviewing the current applicable registration threshold, adding that an increase in the registration threshold for foreign-based electronic service suppliers would be considered to ensure that very small electronic service suppliers were not unduly impacted.

“More broadly, and beyond these regulations, National Treasury notes that the growth and development of electronic services raises many complex issues and, hence, traditional tax – both indirect and direct – and regulatory measures may not be as effective in meeting their objectives as they are for traditional goods and services.

“There is a need to modernise current governmental processes to better incorporate technological innovations in the electronic services sector and to ensure that South Africa keeps abreast with international developments in this area, and is competitive,” National Treasury said.

Therefore, it would be initiating a consultative process to develop a comprehensive paper on the treatment of electronic services, particularly in terms of financial sector regulation, payment systems and taxation, as well as to consider measures to better protect customers.