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South Africa: VAT registration proposal for foreign suppliers of e-services

South Africa: VAT registration, foreign suppliers

Changes to the value added tax (VAT) rules that apply for foreign suppliers of e-services are being considered in South Africa.

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Background

In 2014, the VAT law was amended to provide that foreign suppliers of electronic services (e-services) must register for VAT purposes under certain circumstances. Even though the definition of e-services contained in the regulation was not limited to supplies made by businesses to consumers (B2C), it was very specific as to the services that are considered to be e-services for VAT purposes. 

The Minister of Finance in February 2018 announced in the national budget speech that the current rules concerning and defining “e-services” would be amended for VAT purposes.

Draft regulations were issued (21 February 2018) with a request for comments from the public and stakeholders. The draft VAT regulations (with an initial effective date of 1 October 2018) would broaden the definition of e-services. As a result, except for very few exceptions, most services supplied electronically would be within the definition of e-services. Thus, a majority of non-residents supplying services electronically to South African recipients must register for VAT purposes in South Africa. 

Changes proposed

Subsequent to the release of the draft regulations in February 2018, the National Treasury and South African Revenue Service held workshops with stakeholders to discuss comments received with regards to the draft regulations. During one presentation to the Standing Committee on Finance (part of the process to enact draft legislation), certain changes were recommended, with a request for a similar consultation process and opportunity for the public and stakeholders to comment.

It was requested that the proposed changes to the e-services rules be introduced with an effective date from 1 April 2019 and that the VAT registration threshold be increased from ZAR 50 000 to ZAR 1 million to align it with the VAT registration threshold for domestic supplies.

 

For more information, contact a KPMG tax professional in South Africa:

Erina Cooper | +27 (0) 82 719 5758 | erina.cooper@kpmg.co.za

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