Abstract
A South African software consultant (X) enters into a business transaction with a Swedish company (Z). Z develops copyright software. X performs tests on the software to ensure that the program functions correctly.
Z obstructs extraneous downloading of the software. X accesses the software by logging into Z’s network. The following assumptions are made apropos this case study:
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X is a registered VAT vendor in South Africa.
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Z is a registered VAT vendor in Sweden
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X’s consulting fee does not exceed the Swedish registration threshold and X has performed no other consulting work in Sweden or Europe.
Through the Internet X discharges his services to the Swedish Company’s network while being physically present in South Africa.
Section 11(2)(l) of the South African VAT Act, No. 89 of 1991 (as amended) necessitates administrative burden of proof which is complicated by technology in that the service is rendered electronically. Section 11(2)(k) of the SA VAT Act (1991) states that “a… supply of services… [will] be charged with tax at the rate of zero percent where… the services are physically rendered elsewhere than in the Republic…” (Section 11(2)(k) of the South African VAT Act, No. 89 of 1991 (as amended)).
If services ‘physically rendered’ outside South Africa are zero rated for VAT purposes in terms of traditional application, then if ‘physical presence’ in or through the virtual world is acknowledged the same must apply. Consensus omnium of physical presence in or through the virtual world would be commensurate with current business and technological amelioration and demonstrates VAT’s ability to adapt to technology rather than forcing technology to adapt to tax.
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- 1.
Refer to discussion regarding ‘physical presence’ and ‘physically performed’ in Parts II [p39–83] and IV [p109–139] of this paper.
- 2.
op cit Shorter Oxford Dictionary on Historical Principles (1986), p1426.
- 3.
Section 11(2)(l) of the SA VAT Act, no. 89 of 1991 (as amended).
- 4.
SA Income Tax Act, No. 58 of 1962 (as amended).
- 5.
‘Resident of the Republic’ as defined in section 1 of the SA VAT Act, No. 89 of 1991 (as amended).
- 6.
Section 11(2)(k) of the SA VAT Act, No. 89 of 1991 (as amended).
- 7.
Refer to 18.1.3. Sweden, Part V of this paper [p194].
- 8.
loc cit HMRC, Notice 741A Place of Supply of Services (2010). Available at http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&id=HMCE_PROD1_029955#downloadopt [Accessed 12/12/2010], p9.
- 9.
Supra.
- 10.
loc cit HMRC VAT: Cross-Border VAT Changes 2010. Available at http://www.hmrc.gov.uk/vat/cross-border-changes-2010.htm [Accessed 9/12/2010].
- 11.
op cit McKenzie, Alastair. GST – A Practical Guide (Edition 8) (2008), New Zealand p111.
- 12.
loc cit HMRC Electronically Supplied Services: A Guide to Interpretation (April 2003). Available at http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=oageVAT_ShowContent&id=HMCE_CL_000907?&propertyType=document#downloadopt [Accessed 12/12/2010], p3.
- 13.
loc cit HMRC Electronically Supplied Services: A Guide to Interpretation, http://customs.hmrc....opt, p3.
- 14.
Item 2 of Annex L to the EU VAT Directive, Table 1. loc cit HMRC Electronically Supplied Services: A Guide to Interpretation, http://customs.hmrc....opt
- 15.
supra.
- 16.
Example 2(a) of Table 2 idem.
- 17.
supra.
- 18.
op cit HMRC, Notice 741A Place of Supply of Services, http://webarchive.nationalarchives.gov.uk/20100202144103/ http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&id=HMCE_PROD1_029955.
- 19.
op cit Pinto, Dale E-Commerce and Source-Based Income Taxation (2003), Netherlands, p110.
- 20.
supra.
- 21.
idem p109.
- 22.
op cit CIR v Lever Brothers & Unilever 1946 AD 441 [RSA].
- 23.
ibid Transvaal Associated Hide and Skin Merchants v Collector of Income Tax, Botswana 29 SATC 97 1967 (BCA) [Bots]. As highlighted and discussed in Chap. 12, Part IV of this paper [p115].
- 24.
op cit Pinto, p36.
- 25.
op cit OECD OECD Model Tax Convention on Income and on Capital, Condensed Version – July 2005 (2005), France p85.
- 26.
Section 1 of the SA VAT Act, No. 89 of 1991 (as amended).
- 27.
Botes, MC & De Wet, CG (General Editor) Juta’s Value Added Tax (Revision Service 5, 2008), South Africa, 1 enterprise-6.
- 28.
supra.
- 29.
supra.
- 30.
loc cit CRA Non-Residents and Carrying on Business in Canada Available at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/cmm/gst-tps/nnrs-eng.html [Accessed 30/04/2010].
- 31.
loc cit CRA Doing Business in Canada – GST/HST Information for Non-Residents. Available at http://www.cra-arc.gc.ca/E/pub/gp/rc4027/rc4027-09e.pdf [Accessed 30/04/2010], p6.
- 32.
loc cit CRA GST/HST Technical Information Bulletin GST/HST and Electronic Commerce (July 2002). Available at http://www.cra-arc.gc.ca/BBF6… 090_e.pdf [Accessed 30/04/2010], p16.
- 33.
loc cit CRA GST/HST and Electronic Commerce, http://www.cra-arc.gc.ca/BBF6...090_e.pdf, p17.
- 34.
ibid p4. Refer to page 223 of this paper for the entire list of ‘supply of services’.
- 35.
supra Refer to page 223 of this paper for the entire list of ‘supply of intangible personal property’.
- 36.
Section 6(1)(a) of the NZ GST Act, No. 141 of 1985 (as amended).
- 37.
Section 8(2) of the NZ GST Act, No. 141 of 1985 (as amended).
- 38.
New Zealand Inland Revenue Example C (E-commerce and tax). Available at http://www.ird.govt.nz/ecommerce-tax/ecommerce-incometax/incometax-bus-model-c.html [Accessed 4/12/2010].
- 39.
supra.
- 40.
Proviso (a) of the definition of ‘Resident’, Section 2(1) of the NZ GST Act, No. 141 of 1985 (as amended).
- 41.
op cit McKenzie. p120.
Bibliography
Primary Sources
Cases
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Bardopoulos, A.M. (2015). Case Study: Software Consultant. In: eCommerce and the Effects of Technology on Taxation. Law, Governance and Technology Series, vol 22. Springer, Cham. https://doi.org/10.1007/978-3-319-15449-7_23
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