South Africa’s pioneering move to tax foreign-supplied electronic services
In April 2019, South Africa’s rules were updated with an expanded electronic services definition and the inclusion of the intermediary concept.

In June 2014, South Africa became the second country in the world to introduce legislation applying VAT to the cross-border supply of electronic services (Norway was the first). The E.U. did so six months later, in January 2015, and since then many more taxing jurisdictions have followed suit.
South Africa’s VAT rate to be levied on these supplies has been 15% since April 1, 2018. The original rules introduced by the South African government underwent a significant change in April 2019. The change includes the following:
- It extended the definition of affected electronic services
- Amended the sales threshold triggering registration obligations
- Added the concept of an intermediary to its definition of an ‘enterprise’ responsible for the collection and remittance of VAT
South Africa VAT update: introduction of the intermediary concept
In April 2019, South Africa’s rules on electronic supplies provided by foreign companies were updated with an expanded definition of what electronic services were affected. The new definition states that all services supplied by means of an electronic agent, electronic communication or the internet are within the scope of the new rules.
There was also an increase in the threshold level that triggers registration obligations for affected foreign companies. The threshold increased from the June 2014 original of ZAR50,000 (circa USD$3,550) to ZAR1 million (circa USD$71,500).
The updated South African rules also provide for the concept of the intermediary in the collection and remittance of VAT due to the South African Revenue Services (SARS).
“Section 54(2B) of the VAT Act provides that where electronic services are supplied by an intermediary who is acting on behalf of another person who is the principal for the purposes of that supply, that supply shall be deemed to be made by such intermediary and not by that principal where:
- the intermediary is a vendor;
- the principal is not a resident of the Republic and is not a registered vendor; and
- the electronic services are supplied or to be supplied by the principal to a person in the Republic.”
The definition was also broadened to mean “a person who facilitates the supply of electronic services supplied by the Foreign Electronic Service Entity and who is responsible for issuing the invoices and collecting payment for the supply.”
Here is a useful SARS guide on the simplified registration process and the filing of returns for foreign businesses with sales of electronic services.
The simplified registration and filing process was in line with the OECD guidelines. According to this 2018 presentation to the UN’s Economic and Social Council (ECOSOC), South Africa’s extension of VAT to foreign-supplied electronic services resulted in over 200 new registrations between June 2014 and September 2017. The average registration time was less than 4 days.
Note: This article was published for the inclusion in a special Taxamo report on developments in Africa.
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