Is the sale of on-line products (for example software downloaded directly from a website) subject to taxation?

South Africa previously had a predominantly source based tax system but adopted a resident based tax system some few years ago. The sale of online products will accordingly be subject to income tax where income is derived from online sales by a resident as defined in the Income Tax Act 58 of1962. In the event of income deriving from sales by a non resident, the source basis which entails that income derived from a South African source, would still be applied and the sales will be subject to Income Tax.

Reproduced with permission from Law Business Research. This article was first published in Getting the Deal Through – e-Commerce 2009, (published in August 2008 – contributing editor Robert Bond). For further information please visit

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