iTunes fans warned of rising prices

THE cost of electronic services sourced from overseas is set to increase – and that will affect people ranging from iTunes listeners to doctors reading international publications.

From June 1, 14% value-added tax (VAT) will be imposed on these sales.

The move follows National Treasury having gazetted a note of its intention to amend the VAT Act to encompass electronically imported learning material, online magazine subscriptions, games, games of chance (gambling), photographs, ringtones and music clips.

E-commerce expert Simon Leps said the extension of VAT to include electronic services from foreign suppliers could result in prices spiking by up to 50% by the end of the year when combined with the effects of the rand's recent tumble against the US dollar.

Rhodes University tax professor Matthew Lester said the amendment was aimed at bringing e-goods and e-services in line with the rest of the economy.

The VAT amendment will cover transactions conducted on platforms as defined in the Electronics Communication and Transactions Amendment Act 1 of 2014, which was signed into law by President Jacob Zuma last Friday.

By June, foreign-based electronic goods suppliers will have to register for VAT with the SA Revenue Service (SARS).

Leps said the tax "will impact on consumers in general, but especially on students, lawyers and doctors buying research papers, or buying goods and services that are not available in South Africa".

He added: "It will also affect i-Tunes, e-books from Amazon and South African businesses that have their website and e-mail servers hosted by foreign companies."

Lester said it was necessary to update VAT law in line with the digital era and to increase the SARS revenue base.

"The reason government has amended [the Act] is that it views digital downloads as services and these are supposed to be taxed. It's a case of making sure everything is in the net," Lester said.

Treasury said it wanted suggestions from the public on the matter and would be initiating a consultative process to develop a comprehensive paper on the issue. - Siya Miti and Matthew Field