Using Intermediaries For The Supply of Electronic Services in South Africa

Updated: May 17

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Electronic Service Providers (ESP) can nowadays reach almost any consumer or market, irrespective where these consumers are based. Even though the global market is easy to reach, the tax pitfalls and liabilities in the various tax jurisdictions can create major headaches for the ESP’s, especially when intermediaries are involved.

Who or What is an intermediary?

An “intermediary” means a person who facilitates the supply of electronic services supplied by the ESP and is responsible for issuing the invoices and collecting payment for the supply of electronic services, as defined in The Value-Added Tax Act (the Act).

Intermediaries operate in various forms including “electronic platform operators” or “electronic marketplaces” which facilitates the sales process between buyers and sellers to transact online. Therefore, the intermediary can in certain instances account for VAT as it participates in the supply chain.

Section 54(2B) of the Act allows for a supply to be made and accounted for by an intermediary, and not by the ESP, when all the below requirements are complied with:

  • The intermediary is registered for VAT in South Africa;

  • The principal/ESP is not a resident of the Republic and is not registered for VAT in South Africa; and

  • The electronic services are supplied or are to be supplied by the principal/ESP to a person in the Republic,

It is important to note that the intermediary must ensure that all of the above requirements are met. If only one or two of the above-mentioned requirements are met, the supply will be made by the ESP and not the Intermediary. This will result in the ESP having to assess whether it will be liable to register and account for VAT and comply with the rules contained in the Act.

What if the intermediary is not a registered VAT vendor?

Section 1(b)(iii), read with section 23(3)(b)(AA) of the Act provides that the intermediary must register as a VAT vendor at the end of any month where the total value of taxable supplies made and deemed to be made by that intermediary, exceeded R1 million in any consecutive 12-month period.

What if the intermediary facilitates supplies on behalf of registered and non–VAT registered ESPs?

With reference to SARS’ frequently asked questions on Supplies of electronic services, the intermediary must determine the sum of the value of all of its South African taxable supplies and the total value of all foreign electronic services made by non-VAT-registered EPSs in South Africa. Should the sum of these amounts exceed R1 million in a consecutive twelve-month period, the intermediary becomes liable to register an account for VAT.

The above may become complex if the intermediary facilitates supplies to registered and non-registered foreign ESPs. ESPs will have to separate these transactions in order to determine their VAT liabilities.

VAT IT SA can assist intermediaries in codifying its accounting systems to accurately account for non-registered ESPs deemed supplies. Further, VAT IT SA can assist intermediaries in registering for VAT in South Africa.

Email our consultants at to find out more.

Article by:

Ruan Jansen van Vuuren

Tax Consultant

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