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Will the fee charged by an SA company to a USA company for developing an online game be zero-rated?

03 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

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.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


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