Despite the potentially limitless scope of the VAT law, the VAT Act was recently amended to specifically include foreign suppliers of “electronic services” as subject to South African VAT. South Africa will apply VAT to supplies of electronic services (e-services) made by foreign suppliers to South African customers effective from June 1, 2014. VAT will apply when foreign suppliers make such services available to customers who are resident in the country.
In South Africa, anyone who carries on an enterprise and exceeds a certain turnover threshold must apply for VAT registration. The amended definition of “enterprise” now also includes an “electronic services” provision that any person is carrying on an “enterprise” for South African VAT purposes.
Therefore, a foreign supplier of electronic services that makes taxable supplies that exceed ZAR50,000 after 1 June 2014 will be required to register and account for VAT. The standard VAT rate will apply to these sales, which is currently 14%.
