VAT on e-services in South Africa

SOUTH AFRICA - VAT on e-services in South Africa

March 2019

A foreign-based supplier that provides e-services (as defined) must register for VAT in South Africa if its taxable supplies exceed ZAR 50,000 and if at least two of the following requirements are met:

  • The recipient is a South African resident; or
  • Payment in respect of such e-services originates from a South African bank; or
  • The recipient of those e-services has a business address, residential address, or postal address in South Africa.

This requirement has been in place since 1 June 2014.

Proposed Amendments to VAT Act Related to E-services

In October 2018, Treasury proposed amendments to remove the various categories of e-services subject to VAT and to widen its scope. Under the proposals, VAT would apply to all services provided for consideration by means of an electronic agent, electronic communication, or over the internet. The new regulations will apply to various services, such as cloud computing, software supplies, provision of anti-virus, online advertising, broadcasting, gaming, online consulting, and training services. For the purposes of e-services, Treasury does not distinguish between business-to-business (B2B) and business-to-consumer (B2C) transactions.


The following will not be subject to the VAT on e-services:

  • Educational services supplied from an export country and regulated by an educational authority in terms of the laws of that export country;
  • Telecommunications services (excluding telecommunications content); and
  • E-services between group companies. The e-services must be supplied by a foreign-based supplier company exclusively for the purpose of consumption of those services by the South African resident company.

Intra-group companies

A group company exclusion applies only if the South African company is 100% owned by a foreign company and the foreign company provides the e-services directly. For instance, if the foreign company procures IT services from a third party and re-supplies those services to the South African company, the foreign company must register for VAT if it meets all the requirements for registration.

Interestingly, in formulating the exclusion, Treasury seems to have ignored South Africa’s Broad-Based Black Economic Empowerment (B-BBEE) policy, which aims to help previously disadvantaged South Africans participate in the economy through South African business ownership. This policy has various advantages, such as preferential supplier status in respect of government contracts.

A foreign company with local subsidiaries that have B-BBEE shareholdings will need to register for VAT in respect of e-services provided to its subsidiary.

Intermediaries and platforms

Foreign suppliers that provide e-services using another person’s electronic platform (an intermediary) may not need to register for VAT. The intermediary will be deemed to be the supplier of the e-services for VAT purposes if it meets certain requirements. Local e-services suppliers will not be entitled to use an intermediary for the purposes of providing e-services to its customers and will need to register for VAT in its own name and account for the VAT.


Starting from 1 April 2019, foreign suppliers of e-services, group companies, and intermediaries who facilitate the supply of e-services in South Africa may be required to register for VAT if the total value of taxable supplies exceeds ZAR 1 million over a 12-month period. 

Ayanda Masina
[email protected]

Seelan Muthayan
[email protected]