Zero-rating of services to non-residents

South African value-added tax (VAT) vendors are often unsure of the tax consequences of issuing invoices to foreign customers or clients and whether such services should be invoiced at the standard rate of 15% or be zero-rated. As is generally the case with tax (especially VAT), the answer is that it depends on the circumstances. 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;
  • 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.

The rules and exceptions in section 11(2)(l) are, however, still subject to some interpretation, especially if considered that for services to be at the standard rate of 15%, it should be directly in connection with one of the exceptions noted above. Accordingly, there is some debate on what constitutes directly.

There are, however, several court cases and interpretation notes available to provide taxpayers with some guidance:

  • Master Currency v CSARS 2014 (6) SA 66 (SCA);
  • XO Africa Safaris v CSARS (395/15) [2016] ZASCA 160;
  • SARS Interpretation Note 81; and
  • SARS Interpretation Note 85.

Taxpayers should also ensure that they comply with the documentation requirements for the zero-rating of services, which is at a minimum the following:

  • tax invoice;
  • written confirmation from the recipient that it is not a resident of the Republic;
  • proof of payment; and
  • proof of export (in respect of moveable goods) or a statement from the non-resident that the non-resident or any other person is not present in the Republic at the time that the services are rendered.

[1] The Value-Added Tax Act No. 89 of 1991

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)





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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.


Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.


Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.


Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.