April 2023 update to VAT compliance rules for foreign providers of digital services
South African Revenue Service (SARS) has introduced simplifications for foreign suppliers of electronic services and Foreign Intermediaries, by introducing an exception when calculating the R1 million threshold. The exception being, if a non-resident of electronic services or a Foreign Intermediary exceeds the R1 million threshold, in any consecutive period of 12 months, solely as a consequence of abnormal circumstances of a temporary nature, such Foreign Supplier of electronic services of Foreign Intermediary shall not be liable to register for SA VAT .
Feb 2023 VAT obligations on electronic services; invoicing rules updated 2022
South Africa introduced Value Added Tax collections role on non-resident providers and intermediary marketplaces for digital or electronic services in June 2014. There is VAT registration threshold of R1million, after which a provider must notify Commissioner for the South African Revenue Service (SARS). There is no requirement to appoint a Fiscal Representative. Unusually, South Africa imposes VAT on B2B digital services provided by non-residents – instead of using zero-rating and the reverse charge.
The obligations for invoicing was changed for 2022 (see below).
See VAT Calc’s global VAT and GST on digital services tracker to follow global trend for taxing digital services.
What digital services are subject to South African VAT?
Income from the following supplies are considered taxable:
- Downloading and streaming music or videos
- E-books, publications and images
- Subscriptions to membership sites, including dating sites
(From 1 April 2019) Services supplied by means of an electronic agent, electronic communication, or the internet
The following services from non-residents are excluded:
- Educational services provided by recognised educational establishments in their country of residence
- Supplies to companies with either side owning 70%+ shares of the other, and the services are supplied exclusively to the South African resident customer
Determining South Africa place of supply
Any non-resident must determine if their customer is within the South African VAT net. This is based on the following specific rules for establishing the place of supply:
- Electronic services are supplied in South Africa
- Payments are made from a South African bank
- Businesses with South African address, or for consumers a residential address
Foreign intermediary electronic marketplaces will be considered responsible for the VAT of the non-resident. This applies where the vendor is not resident and its marketplace intermediary acts as the contract principal. This marketplace liability was introduced in April 2019.
In this case, the marketplace must VAT register if over the registration threshold.
B2B digital services liable to VAT
Since 1 April 2019, South Africa has imposed VAT obligations on non-resident providers of digital or electronic services to resident businesses. Almost all other countries use the reverse charge.
2022 invoicing requirements
Since 2022, invoices must include:
- B2B invoices must include the VAT number of the customer. Previously the name, address and contact details was sufficient.
- A full and proper description of the services must now be added.
- The VAT must be stated in SAR’s currency
- New FX rules
VAT registration and compliance
Vendors must produce VAT invoices with basic transaction details. There is a simplified electronic services business VAT registration process, available online with SARS. South African VAT returns are completed monthly. Returns are due by the last businesses day of the month following the reporting period.
Africa & Middle East VAT on digital services
|Comments (click for details)||Rate||Date||Threshold||Comments|
|Cameroon||19.5%||Jan 2020||XAF 50 million|
|Egypt||14%||Sep 2016||EGP 500,000|
|Ghana||12.5%||Apr 2022||GHS 200,000|
|Kenya||16%||Sep 2013||-||Registration threshold removed 2023|
|Oman||5%||Apr 2021||OMR 35,000|
|Saudi Arabia||15%||Jan 2018||Nil|
|Senegal||18%||Jan 2023||Nil||Fiscal representative required|
|Sierra Leone||15%||SLE 100,000|
|South Africa||15%||Jun 2014||ZAR 1 million|
|Tanzania||18%||Jul 2022||Nil||Residents since Jul 2015|
|Tunisia||19%||Jan 2020||Nil||Withholding VAT; 3% Royalty Tax|
|Uganda||18%||Jan 2020||UGX 150m|
|United Arab Emirates||5%||Jan 2018||AED 375,000|