Register to receive Taxand’s latest opinion on topical tax news
News › Weekly Alert Article
Registration requirement for foreign suppliers of electronic services clarified
Changes in legislation mean that all foreign suppliers of electronic services in South Africa are required to register for VAT in South Africa. Taxand South Africa takes a look at the updated legislation.
The updated legislation places an obligation on foreign suppliers to register for VAT in South Africa if they make supplies of electronic services in excess of R50 000 in a 12 month period to customers who are either tax resident in South Africa, or where payment for the services by such customers originates from South African bank accounts.
The final regulations specifying what constitutes ‘electronic services’ for purposes of the VAT Act were published on 28 March 2014, but they will only come into force on 1 June 2014. The scope of the final regulations has been significantly reduced from that of the draft regulations first published, following a consultation process undertaken by National Treasury. The reduced scope of the regulations is very much welcomed, as the inclusion of some of the original services would only have resulted in increased administration for the South African Revenue Service and the foreign supplier, with very little (if any) additional revenue for the State.
Also published in Thomson Reuters' Taxnet Pro, 25 April 2014
The South African Revenue Service has simplified the VAT registration process for foreign suppliers of electronic services who are obliged to register for VAT in South Africa. If a company supplies electronic services in South Africa, they are not required to open a South African bank account, and the appointment of a South African resident representative vendor is also not required. Foreign companies are entitled to apply for VAT registration in South Africa from 7 April 2014, but the registration will only be made effective from 1 June 2014.