The Collection of Value Added Tax on Cross-border Digital Trade – Part 1: Registration of Foreign Vendors

Abstract

The principal deficiency in modern VAT systems is their inability to levy VAT on affected transactions through a simplified collection mechanism that does not overburden taxable entities charged with VAT collection, or is not inefficient from an economic point of view. VAT systems that do not specifically provide for, or which have not been adapted to cope with, technology-driven advances, generally do not provide for the adequate levying and collection of VAT on cross-border digital trade. The South African VAT system is no exception. Part 1 of this two-part article, investigates the feasibility of compulsory registration of foreign suppliers as VAT vendors as a VAT collection mechanism for the collection of South African VAT on cross-border digital trade.