VAT on e-services to now incorporate group relief

20 February 2019

The proposed amendments to VAT on electronic services, effective 1 April 2019, raised a few concerns. They widened the definition of electronic services and pulled electronic services between group companies into the VAT on electronic services net. This would have resulted in a non-resident company supplying electronic services to a group company in South Africa, being required to register for VAT in South Africa if it met the ZAR 1 million registration threshold. Group relief was provided, and the non-resident was excluded from VAT registration in 100% held (by controlling company) scenarios. The 100% shareholding requirement did not consider local employee incentive and other empowerment programmes (B-BBEE). Today, the Minister announced that the definition of “group of companies” will be amended to cater for local employee incentive and other empowerment programmes, also with effect on 1 April 2019.