2015, foreign suppliers of electronic services (such as audio-visual content,
e-books etc.) in South Africa are deemed to operate an enterprise for VAT
locally. Although the regime has been in place for several years, new
regulations in this regard are continuously published, the latest being on 18
March 2019, with an effective date of 1 April 2019. Along with the new
regulations, SARS has published a “FAQ” document that addresses some of the
questions that vendors and the public at large are likely to have about the
implications of the updated regulations and recent legislative amendments.
Below, we explore some of the more pertinent matters that SARS addresses in the
What are electronic
Electronic services mean any services supplied by a
non-resident for consideration using –
an electronic agent; an electronic communication; or the internet.
Electronic services are therefore services, the supply of
is dependent on information technology; is automated, and involves minimal human intervention.
Simply put, this means that from 1 April 2019, you will
have to pay VAT on a much wider scope of electronic services. The regulations
now include any servicesthat
qualify as “electronic services” (other than a few exceptions) whether
supplied directly by the non-resident business or via an “intermediary”.
Some examples include:
Auction services;Online advertising or provision of advertising space;Online shopping portals;Access to blogs, journals, magazines, newspapers, games, publications,
social networking, webcasts, webinars, websites, web applications, web series;
andSoftware applications downloaded by users on mobile devices.
What is specifically
excluded from the ambit of electronic services in the updated regulations?
Excluded from the updated regulations are –
telecommunications services; educational services supplied from an export country (a country other
than South Africa), which services are regulated by an education authority
under the laws of the export country; and certain supplies of services where the supplier and recipient belong to
the same group of companies.
What is the reason
for the updated regulations?
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.
Do the updated
Regulations make a distinction between Business-to-Business (B2B) and
Business-to-Consumer (B2C) supplies?
No, there is no distinction between B2B and B2C
supplies, therefore, B2B supplies will be charged with VAT at the standard
rate. This outcome was intentional as the South African VAT system does not
fully subscribe to the B2B and B2C concepts.
What are some
examples of supplies that are not electronic
Certain educational servicesCertain financial services for which a fee is charged Telecommunications servicesCertain supplies made in a group of companiesThe online supply of tangible goods such as books or clothingCertain supplies or services that are not electronic services by their
nature, but where the output and conveyance of the services are merely
communicated by electronic means, for example:a legal opinion prepared in an export country, sent by e-mail; andan architect’s plan drawn up in an export country and sent to the
client by e-mail.
the much wider scope of application for electronic services, both local and
foreign vendors need to ensure that VAT is levied at the appropriate rate on
the supply of electronic services – and local vendors, where relevant, need to
retain the necessary supporting documents to substantiate any input tax claims.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)