Must VAT be charged by a foreign web hosting company for services rendered to a SA customer?
17 June 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: A South African
based company uses BDE Pty (Ltd) (based outside of SA) as their hosting company
for local and international web hosting. Would it be correct to say that should
their customer be based in South Africa they would charge standard VAT, but if
their customer is based internationally their VAT would be zero-rated?
A: Whilst it may
be true that the rate of zero per cent would normally apply where a vendor
supplies a service to a person who is not resident of (and consumes the service
in) another country we can’t comment on foreign legislation.
With effect from 1 June 2014, a person who supplies
electronic services, from a place outside South Africa, must be registered as a
VAT vendor if the person makes supplies to a recipient who is a resident of the
RSA, or if payment for the electronic services originates from a South African
bank, and the total value of taxable supplies made by that person has exceeded
R50 000. The services which are regarded
as electronic services are not listed in the VAT Act, but in a regulation
published by the Minister of Finance.
BDE may well be registered as a vendor in the RSA because of this.
The hosting service may well not be an electronic service
and would then, for the RSA recipient, be an ‘imported service’ to the extent
that it is not used for purposes of making a taxable supply.
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.