Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      World Bank set to back South Africa’s big energy grid roll-out

      20 June 2025

      The algorithm will sing now: why musicians should be worried about AI

      20 June 2025

      Sita hits back at critics, promises faster, automated procurement

      20 June 2025

      The transatlantic race to create the first television

      20 June 2025

      Listed: All the MVNOs in South Africa – 2025 edition

      19 June 2025
    • World

      Watch | Starship rocket explodes in setback to Musk’s Mars mission

      19 June 2025

      Trump Mobile dials into politics, profit and patriarchy

      17 June 2025

      Samsung plots health data hub to link users and doctors in real time

      17 June 2025

      Beijing’s chip champions blacklisted by Taiwan

      16 June 2025

      China is behind in AI chips – but for how much longer?

      13 June 2025
    • In-depth

      Meta bets $72-billion on AI – and investors love it

      17 June 2025

      MultiChoice may unbundle SuperSport from DStv

      12 June 2025

      Grok promised bias-free chat. Then came the edits

      2 June 2025

      Digital fortress: We go inside JB5, Teraco’s giant new AI-ready data centre

      30 May 2025

      Sam Altman and Jony Ive’s big bet to out-Apple Apple

      22 May 2025
    • TCS

      TCS+ | AfriGIS’s Helen Hulett on how tech can help resolve South Africa’s water crisis

      18 June 2025

      TechCentral Nexus S0E2: South Africa’s digital battlefield

      16 June 2025

      TechCentral Nexus S0E1: Starlink, BEE and a new leader at Vodacom

      8 June 2025

      TCS+ | The future of mobile money, with MTN’s Kagiso Mothibi

      6 June 2025

      TCS+ | AI is more than hype: Workday execs unpack real human impact

      4 June 2025
    • Opinion

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025

      Singapore soared – why can’t we? Lessons South Africa refuses to learn

      13 June 2025

      Beyond the box: why IT distribution depends on real partnerships

      2 June 2025

      South Africa’s next crisis? Being offline in an AI-driven world

      2 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » News » VAT on electronic services: what you need to know

    VAT on electronic services: what you need to know

    By Seelan Moonsamy26 November 2018
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp

    National treasury recently published an amended regulation for electronic services, in line with the proposal by the minister of finance in the budget review of 2017. They stated that the VAT base for electronic services would be expanded.

    The amended regulation has an effective date of 1 April 2019. International suppliers of services to South African customers must evaluate whether their supply of services qualify as electronic services, and whether this would create a liability to register for VAT in South Africa.

    The amended regulation ushers in the following noteworthy changes:

    • The previous list of specific services that comprised electronic services was jettisoned and replaced with a broad definition of electronic services, including “any services supplied by means of an electronic agent, electronic communication or the Internet for any consideration”;
    • There is some relief for business-to-business transactions that take the form of intra-group transactions — where the South African company is a wholly owned subsidiary of the foreign company (the foreign service provider), these transactions are excluded from the scope of electronic services;
    • The activities of an “intermediary” are now included in the ambit of an “enterprise”; and
    • The registration threshold for suppliers of electronic services was adjusted upwards to R1-million on a rolling 12-month basis.

    The impact of the amended regulation is that all services that are supplied from abroad by an “electronic agent”, “electronic communication” or the “Internet” are now electronic services for the purposes of VAT.

    What is envisaged by the definition is that the services being supplied are essentially automated and involve minimal human intervention; and are impossible to ensure in the absence of IT. Only a limited number of services that may be provided by the above means are excluded from the definition of electronic services, namely educational services regulated in the export country of the foreign service provider, and telecommunications services.

    All services that are supplied from abroad by an ‘electronic agent’, ‘electronic communication’ or the ‘Internet’ are now electronic services for the purposes of VAT

    The reach of the new regulation is staggering and may also include the supply of the following services: software subscription services; the use of software by an entity in South Africa provided electronically by its holding company situated abroad (unless the exclusion applies); broadcasting; cloud computing; advertising services; gaming; and any reservation services made via an online platform.

    It is also interesting to note that there is no distinction between business-to-business or business-to-consumer supplies in the amended regulation, notwithstanding the fact that this differentiation was strongly advocated for before the amended regulation was published. The corollary is that B2B and B2C supplies are treated similarly for VAT purposes.

    The author, Seelan Moonsamy, says the reach of the new regulation is “staggering”

    Foreign intermediaries that facilitate the supply of electronic services (on behalf of the foreign service provider) and who are responsible for invoicing and collecting payment for the electronic services, are also required to register for VAT. In essence, where a foreign service provider uses an intermediary (a platform) to supply services to customers located in South Africa, and the platform is responsible for issuing the invoice and collecting the payment in respect of the supply of the services, the platform is “deemed” to be the provider of the electronic services. It is the platform and not the foreign service provider that would be liable to register as a VAT vendor in South Africa.

    All foreign businesses that supply electronic services in South Africa should determine if their services are supplied by means of an electronic agent, electronic communication or via the Internet. If the total value of taxable supplies made by the foreign supplier in any year exceeds R-1 million, a liability to register for VAT may be triggered. Failure to register for VAT in a timeous manner may have a huge financial impact for these foreign service providers, as the South African Revenue Service would levy penalties and interest and this may also lead to reputational damage.

    • Seelan Moonsamy is a consultant in tax at Baker McKenzie in Johannesburg


    Baker & McKenzie Sars Seelan Moonsamy South African Revenue Service top
    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleThe great e-tolls debate: Wayne Duvenage vs Coenie Vermaak
    Next Article Bitcoin crash testing the faith of key players

    Related Posts

    ‘Advanced’ data analytics, AI to help Sars reach ‘tougher’ collections target

    21 May 2025

    Home affairs, Sars ink digital pact

    6 April 2025

    Sars gets R3-billion for digital upgrades

    12 March 2025
    Company News

    Making IT happen: how Trade Link gears up to enable SA retail strategies

    20 June 2025

    Why parents choose CambriLearn for online education

    19 June 2025

    Disrupt first, ask questions later – the uncomfortable truth about incident response

    18 June 2025
    Opinion

    South Africa pioneered drone laws a decade ago – now it must catch up

    17 June 2025

    AI and the future of ICT distribution

    16 June 2025

    Singapore soared – why can’t we? Lessons South Africa refuses to learn

    13 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.