“The current application of VAT on imports does not lend itself to the effective enforcement on imported services or e-commerce where no border posts [or parcel delivery agents] can perform the function as collecting agents,” the Treasury said.
“The net result is that the local consumers can buy imported digital products without paying VAT. This outcome not only places local suppliers of digital services at a competitive disadvantage but also results in a loss of revenue for the fiscus.”
The ESR was published on the websites of the SA Revenue Service and National Treasury.
Written comments had to be submitted by February 20.
The publication follows the announcement by Finance Minister Pravin Gordhan last year that all foreign businesses supplying e-books, music and other digital services in South Africa would be required to register as VAT vendors.
Imported services included the supply of e-books, e-music, e-films, software, images, games, information system services, internet-based auction services, maintenance services, and educational services.