VAT on electronic services

On 24 October 2018, National Treasury published new regulations pertaining to “electronic services” defined in Section 1 of the Value Added Tax (VAT) Act of 1991. These regulations relate specifically to the provision of electronic services, and came into effect on 1 April 2019.

If your business is making use of Google Ads, Facebook Ads or similar, this has bearing on your business input VAT.

What regulations were changed?

The new regulations broadened the definition of “electronic services” to include “any services supplied by means of an electronic agent, electronic communication or the internet for any consideration…”

As a result of this amendment to the definition, foreign electronic service companies supplying services to qualifying recipients conducting business in South Africa would be required to register for VAT in South Africa, with effect from 1 April 2019.

What are electronic services?

These services include:

  • online advertising (including Google, Twitter and Facebook)
  • online consulting services
  • software subscriptions (including Microsoft)
  • streaming services (including Netflix)
  • online games
  • podcasts
  • online courses, and
  • publications

all of which are now required to levy VAT at 15% on their turnovers in South Africa.

What does it mean for your business?

If your business is making use of foreign supplied electronic services as set out above, and is being levied VAT in South Africa on these services, your business will require a valid VAT invoice to claim the input VAT from SARS.

The account profile in place with the vendor, for the supply of your services, will include a SA VAT zone wherein you would enter your VAT number and ensure henceforth that all invoices from such suppliers are downloaded from this profile and bear your VAT number.

If you require assistance with ensuring your business can claim this input VAT, reach out to our team for support on https://bit.ly/2BmlRhW.



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