In a rush? Here’s a summary:
- Online advertising platforms (like Google & Facebook) are now charging 15% VAT
- This will result in less conversions if advertising budgets do not increase accordingly
If you’re advertising on Google or Facebook, whether for your own business or on behalf of a client, this is the most important thing you’ll read this year! With the former South African finance minister’s broadening of Value Added Tax (VAT), electronic services rendered by multinational companies in South Africa are – for the first time – susceptible to VAT. So, how has VAT changed with regard to electronic services? What does this mean for online advertisers? Let’s find out:
VAT Changes on Electronic Services
From the 1st of April 2019 foreign services providers offering digital services in South Africa have to be VAT-registered in order to continue operations. These companies include Facebook, Google, Netflix, Yahoo, and any organisation that offers services over the internet.
This includes entities like anti-virus programmes, cloud computing providers, gaming platforms, educational websites, online broadcasters, and others. Activities of intermediaries are incorporated in the scope of enterprises, and the Value Added Tax registration threshold for suppliers of online services has been increased to R1 million on a 12-month basis.
How This Affects Marketers
Not a fan of financial talk? We hear you! Here’s what the application of VAT on electronic services means for digital advertisers:
- VAT of 15% will now be added to every Rand spent on advertising through Google, Facebook, LinkedIn, Instagram, Twitter and other social advertising platforms.
- Advertising spends that remain the same will more than likely result in less impressions, less clicks, less conversions, and ultimately less business.
- With 15% of a paid digital advert budget now going to VAT charges, clients should ideally increase their spends by 15% – 20% in order to compensate.
- The responsibility falls on advertisers to notify clients participating in paid online advertising regarding the recent implementation of VAT on these services.
Find Out More About VAT on Facebook & Google Ads
We’ve been advertising our clients online for 10 years, and we’re Badged Google Partners. Contact WSI Durban if you’d like to find out more about Value Added Tax changes to internet services in South Africa, or if you’d like to start promoting your brand effectively online!