The VAT base for electronic services in South Africa was broadened as from 1 April 2019. More specifically, foreign businesses that supply services to customers (i.e., both B2B and B2C) by means of an electronic agent, electronic communication or the internet for any consideration would be liable to register for VAT in South Africa, where the following conditions are met:  

1. A ZAR 1 million threshold in any rolling 12 month period is breached; and   2. Where two of the following circumstances prevail:    (a)    If the customer is a resident of South Africa. (b)     If the customer has a postal, business or residential address. (c)    If the payment for such electronic services originates from a bank in South Africa.

Types of services   

The services that are envisaged by the broadening of the VAT base would include the following: 

  • Any reservation services made via an online platform  
  • Software subscription services  
  • Broadcasting  
  • Cloud computing  
  • Advertising services  
  • Gaming

However, electronic services exclude:

  • Educational services that are regulated by an educational authority in an export country  
  • Telecommunications services

Reservation services  

Interestingly, where an online platform charges a facilitation fee for facilitating the booking of accommodation for a South Africa resident customer (for accommodation inside or outside South Africa), the services supplied by the online platform fall within the ambit of electronic services. It follows that the platform would have to charge VAT at the rate of 15% on the facilitation fee, notwithstanding the fact that it facilitates the booking of accommodation that is located outside South Africa.


Furthermore, where a foreign supplier of electronic services provides the services by using the electronic platform of an intermediary, this intermediary will be deemed to be the supplier for VAT purposes if it facilitates the supply of the electronic services and is responsible for issuing the invoice and collecting the payment. It follows that the foreign service provider would have no obligation to register for VAT in South Africa. An intermediary that facilitates the supply of electronic services on behalf of the foreign service provider and outsources the issuing of the invoice and collection of payment to a third party supplier may still be required to register for VAT in South Africa (if certain conditions are met).  

Non-compliance may be costly  

A foreign business providing services to South African resident customers (and an intermediary acting on behalf of such a foreign business, as described above) must assess whether it has an obligation to register for VAT in South Africa. Failure to register for VAT in a timely manner would lead to penalties and interest being imposed by SARS, and the foreign business and intermediary may also incur reputational damage that may impact its business.