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Must VAT be charged on “exported services” rendered over the internet?

09 June 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: Someone has a client outside of South Africa, to which he provides a service. The service is carried out in South Africa, (over skype), but invoiced to the foreign country. Should VAT be charged?

A: We assume the ‘someone’ is registered as a vendor.  Output tax will have to be levied, but it may be that the rate of zero percent will apply.  It will apply if section 11(2)(l) applies.  It will apply if the services are supplied to a person who is not a resident of the Republic, not being services which are supplied directly-

(i)   in connection with land or any improvements thereto situated inside the Republic; or

(ii)   in connection with movable property (excluding debt securities, equity securities or participatory securities) situated inside the Republic at the time the services are rendered, except movable property which-

(aa)   is exported to the said person subsequent to the supply of such services; or

(bb)   forms part of a supply by the said person to a registered vendor and such services are supplied to the said person for purposes of such supply to the registered vendor; or

(iii)   to the said person or any other person, other than in circumstances contemplated in subparagraph (ii)(bb), if the said person or such other person is in the Republic at the time the services are rendered,and not being services which are the acceptance by any person of an obligation to refrain from carrying on any enterprise, to the extent that the carrying on of that enterprise would have occurred within the Republic. 

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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