South Africa Implements VAT on Foreign Electronic Service Providers

By Graeme Saggers, Nolands

On 01 June 2014, South Africa implemented regulations that required certain foreign providers of electronic services to register for VAT. These regulations have gone through an amendment and new regulations were published on 18 March 2019 with an effective date of 01 April 2019. The original regulations limited the scope of services that qualified as electronic services and which must be charged with VAT at the standard rate.

The intention of the updated regulations is to substantially widen the scope of services that qualify as electronic services, so that all services supplied for a consideration (subject to a few exceptions), which are provided by means of an electronic agent, electronic communication, or the internet, are electronic services and must be charged with VAT at the standard rate of (currently)15%.

Unfortunately, this did not give much time for implementation of these widened regulations. It is important to bear in mind that the South African VAT system does not fully subscribe to Business-to-Business (B2B) and Business-to-Consumer (B2C) concepts and thus any electronic service provider supplying to South Africa will need to consider whether they are required to register for VAT.

Examples of electronic services include, amongst others, games, auction services, on-line advertising, on-line shopping, web-based broadcasting, access to e-books and other publications, software-as-aservice (SAAS) applications, and software applications downloaded onto mobile phones. The registration process is a simple online process and does not require the vendor to maintain a South African bank account. VAT returns are (unless certain thresholds are met) required to be filed every two months. The implementation of these regulations is as a direct result of the BEPS Action Plan 1 initiative. South Africa has not, however, indicated that they will be introducing any form of digital services tax.

Graeme Saggers

Graeme Saggers

GGI member firm
Advisory, Auditing & Accounting, Fiduciary & Estate Planning, Tax
More than 10 offices throughout Africa
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Nolands is an international auditing firm located in 11 offices in all major centres in Africa. Nolands employs almost 200 people and focuses on providing the best possible solutions for its clients. The company prides itself on being “not ordinary” and on its ability to integrate services and respond rapidly to clients’ needs.

Graeme Saggers is the Tax Director for Nolands. He holds a BCom (Hons) degree from Rhodes University and an MCom (Tax) degree from the University of Cape Town. Graeme qualified as a chartered accountant in 2009 after completing his articles at KPMG. He joined Nolands in 2011 as an audit manager and was appointed as a tax partner at Nolands in September 2014. Graeme is Regional Chairperson Middle East Africa of GGI’s ITPG.

Published: Indirect Taxes Newsletter, No. 10 Spring 2020 l Photo: espiegle -

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