This article will-look at whether the South African Value Added Tax Act (VAT) is up to the challenge of electronic commerce. The main question is 'can the South African Value Added Tax Act which is based on the physical economy, be flexible enough to embrace the virtual economy?' In order to answer this question, the VAT Act and the Organisation for Economic Corporation and Development (OECD) principles will be critically analysed. Since digitised products are intangible only "VAT services" provisions will be considered. The discussion paper starts by giving a brief overview of e-commerce in part 2. This is followed by part 3, which stipulates the OECD's generally accepted e-commerce principles for consumption taxes such as VAT. Part 4 discusses the law and definition of concepts of VAT that may apply to digitised services. The last part discusses the application of the law to digitised products in the virtual e-commerce world.
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