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taken from The Taxpayer, August 1997
The growing use of call-back telecommunication services has moved the Revenue to make amendments to the VAT Act. The following is the explanation given in the Explanatory Memorandum to the Taxation Laws Amendment Act.
"Where a person who is not a vendor or is a partially exempt vendor, makes use of, for example, so called call-back telecommunication services in the Republic, instead of using local telecommunication services, an imported service is in terms of section 7(1)(c) deemed to be supplied to him. He must then in terms of section 14 account for VAT on a declaration and pay the VAT to the Receiver of Revenue within thirty days of the issuing of an invoice for such services rendered, or any payment in respect of such services.
As such services are used on a large scale in the Republic and VAT is seldom paid in respect of the imported services by the users concerned, other measures have to be introduced to ensure the payment of VAT in respect of such services. A new subparagraph (b)(iv) is introduced to the definition of "enterprise" in section 1 in terms of which the activities of any person who continuously or regularly supplies telecommunication services to any person who utilises such services in the Republic, constitutes an enterprise.
The affect of the amendment is that the provider of any such call-back services, or any other telecommunication services to users in the Republic, must register as a vendor in the Republic. The scope of the definition of "enterprise" is thus broadened by specifically including activities which it could otherwise be argued do not constitute an enterprise in the Republic as the equipment facilitating, for example, such call-back services is not situated in the Republic. This principle is in line with the International Telecommunication Regulations, in terms of which telecommunication services are taxed in the country where the services are used."
Designating the supplier of call-back services to be an enterprise is to come into operation on a date to be fixed by the President by proclamation in the Gazette.
It is somewhat ironic that call-back enterprises have been told that they are acting illegally because they cut into Telkom's monopoly.
