Q: An SA registered private company employs 3 developers at their Cape Town
offices on a permanent basis. Two of the developers work 100% of the time
developing and maintaining an online game for a US based company. All
development work is done in SA and the developers are employed by the SA
company. When the SA company bills the US company, will there be a difference
in VAT treatment should they bill them for development hours versus salary
recoupment? Will billing for development hours attract VAT because all
development is taking place in SA? Will it be at 14% or 0%?
A: Section 11(2)(l) VAT Act provides for zero
rating on services rendered to non-residents. You would therefore have to
determine whether any of the exclusions apply factually. We are of the view
that in respect of the maintenance service, if the servers on situated in SA
then the exclusion in 11(2)(l)(ii) VAT Act may apply.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
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