In terms of the VAT Act, all services typically attract a standard 15% VAT unless specified otherwise under sections like Section 11, which zero-rates services that are supplied to non-residents under certain conditions. Therefore, it is quite possible that services to a non-resident can be invoiced at the standard rate, or at a zero-rate.
Importantly, section 11 of the VAT Act,[1] which deals with the zero-rating of supplies, distinguishes between the supply of goods (section 11(1)) and services (section 11(2)). The default position in terms of section 11(2)(l), is that services rendered to persons who are not residents in the Republic should be made at the zero-rate. There are, however, three exceptions to this default rule, and specifically where the services are supplied directly:
- in connection with land or improvements in the Republic (RSA);
- in connection with moveable property situated in SA at the time that the service is rendered (except if the moveable property will be exported after the service, or forms part of a supply by the person to the vendor and the services are for the purpose of that supply); and
- the person or any other person is in the Republic at the time the service is rendered.
The circumstances of the service should be tested against each rule, meaning that you cannot simply zero-rate a service if you meet only one of the criteria. All three tests should be met independently to zero-rate the service. This confirms the principle that the purpose of section 11(2)(l) is to ensure that when services are consumed in South Africa, VAT is payable at the standard rate.
Please feel free to contact us should you require further information on VAT.
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