Electronic Services – Out with the old and in with the new
15 July 2026
The VAT Act contains specific provisions that deal with electronic services supplied in South Africa by non-resident entities. These provisions were first introduced in 2014 with subsequent amendments to both the VAT Act and the Electronic Services Regulations being introduced over the years. In 2019, amendments were made whereby the scope of services that were included in the definition of electronic services was significantly broadened, and the intermediary concept was introduced. In 2025 a notable change occurred for electronic service providers relating to Business-to-Business (“B2B”) transactions, which has impacted the VAT registration requirements for electronic services providers.
With effect from 1 April 2025, where an electronic service provider only supplies electronic services to VAT registered B2B customers, the vendor would be excluded from the electronic services regime. This means that these types of electronic service suppliers are not required to register for VAT or if registered, could deregister. If an electronic service provider provided both B2B and Business-to-Consumer (“B2C”) supplies, or made supplies to non VAT registered B2B customers, it would fall into the regime and would be required to be / remain registered for VAT.
A concern which has been raised is where electronic service providers are only now realizing that they have SA VAT considerations. In particular, suppliers who no longer meet the registration requirements as they only provide electronic services to VAT registered B2B customers whereas under the rules prior to the 2025 amendments they would have been required to have registered for VAT.
This concern has sparked the question, do the new rules override the old rules? i.e. does all VAT liabilities “fall away”
Looking into the wording of the regulations issued in 2025, it states that,
“These Regulations will come into effect on 1 April 2025 and will repeal all prior Regulations published for this purpose, from that date.”
This means that the new rules will apply from 1 April 2025, and all previous versions of the rules will fall away from that date. This indicates that the “old rules” would remain applicable up to and including 31 March 2025.
As a result, an electronic service provider may have to register for VAT and account for the VAT that is due to SARS prior to 1 April 2025, and thereafter, if it no longer meets the registration requirements it would be eligible to deregister. Though this may be considered an administrative burden, regularising the non-compliance has far greater implications, especially in the form of penalties and interest, which can compound and add-up quickly.
The current compulsory VAT registration threshold for electronic services providers is R2.3 million which came into effect on 1 April 2026. Previously, the compulsory VAT registration threshold was R1 million (pre 1 April 2019).
In order to regularise the non-compliance, an electronic service provider should first determine when supplies were first made to SA customers and thereafter determine whether based on the VAT registration rules at the time whether the requirements were met and then to determine the effective date of registration. Once this has been determined the compliance will be required to be remedied. A vendor should consider the use of a Voluntary Disclosure Programme (“VDP”) as a viable option. With a successful VDP, any penalties (late payment and understatement penalties), will be remitted, the VAT and interest due would however remain payable.
Take away
Even though an electronic service provider who only makes supplies to VAT registered B2B customers may not be required to register for SA VAT now, it may still need to register for VAT to rectify its non-compliance for the time where it was required to register for VAT.
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