VAT on digital services in South Africa: rules for SaaS sellers

Digital services sold to South African customers are subject to VAT at 15%. A South African software or digital business follows the normal VAT rules (register when taxable supplies exceed the compulsory threshold, now R2.3 million). A foreign supplier of "electronic services" must register with SARS once its electronic services supplied into South Africa exceed R1 million in 12 months, although since 1 April 2025 a foreign supplier that sells only to South African VAT-registered businesses is excluded from that regime.

This guide covers both sides, because many African SaaS companies are both buyers and sellers of digital services. It's general information: the SARS guide to electronic services by foreign suppliers is the authoritative source.

Scenario 1: you're a South African digital business

If you're a South African resident company selling SaaS, online courses, apps, streaming or other digital products:

• The electronic services regime doesn't apply to you; it's aimed at foreign suppliers. You follow the ordinary VAT rules.
• You must register once your taxable supplies exceed R2.3 million in 12 months (from 1 April 2026), and may register voluntarily above R120,000. See VAT registration threshold.
• Sales to South African customers are generally standard-rated at 15%.
• Sales of services to non-resident customers may qualify for zero-rating under the export-of-services rules, but the conditions are specific (for example, where and to whom the service is supplied). Check with your tax practitioner rather than assuming every foreign sale is zero-rated.

Scenario 2: you're a foreign supplier selling into South Africa

South Africa has taxed foreign suppliers of electronic services since 2014 and broadened the definition significantly in 2019. In summary, as of September 2026:

The B2B change matters: if a foreign SaaS company supplies even some South African consumers or non-registered businesses, it must account for VAT on all its South African electronic services, including those to VAT-registered customers.

What counts as electronic services?

Broadly, services supplied by means of an electronic agent, electronic communication or the internet for consideration. That includes SaaS, cloud software, streaming, online games, e-books and many online platforms. There are specific exclusions (for example certain educational services regulated by an education authority, some telecommunications services and certain financial services). Because the definition is broad, assume a digital product is included until you've confirmed an exclusion.

Buying foreign software as a South African business

If your business buys software from a foreign supplier:

• VAT charged on the invoice: if the supplier is registered in South Africa and charges 15% VAT, you can generally claim it as input tax (if you're a VAT vendor) provided you hold a valid tax invoice.
• No VAT charged: imported services acquired for non-taxable purposes may trigger "imported services" VAT that you must declare yourself. Where you use the service fully for making taxable supplies, this typically doesn't apply. Ask your accountant how this works for your business.

Invoicing digital services correctly

Whether you're local or foreign, your invoices to South African customers should:

• Show VAT separately (or state that prices include VAT) and your VAT number.
• Meet the tax invoice requirements for the value of the supply; see what a valid tax invoice must contain.
• Be issued for each billing period of a subscription, with the correct date and period.
• Record where the customer is located and whether they're VAT-registered, so you can apply the right treatment.

For subscription businesses, VAT also affects pricing. Decide upfront whether your published prices include VAT, and handle mid-contract VAT registration carefully. Our SaaS payments guide covers pricing and collections for software startups.

Practical checklist for SaaS companies

• Determine whether you're resident or non-resident for VAT
• Track taxable supplies monthly against the right threshold (R2.3 million local; R1 million foreign e-services)
• Capture customer country, address and VAT number at sign-up
• Configure VAT-inclusive or exclusive pricing consistently
• Issue compliant tax invoices for every subscription renewal
• Keep records for at least five years (see record keeping requirements)
• Review export and zero-rating treatment with a tax practitioner

How CentraPoint helps

CentraPoint's VAT settings let you set VAT registration, rates and inclusive or exclusive pricing, and every subscription renewal produces a branded tax invoice PDF with VAT shown correctly. Customer records hold addresses and VAT numbers, reports summarise VAT by period, and invoices can sync to Xero, QuickBooks, Zoho Books or Sage for your returns. See subscriptions and invoices in the docs.

Frequently asked questions

Do South African SaaS companies charge VAT?

Yes, once they're registered for VAT. Registration is compulsory above R2.3 million in taxable supplies over 12 months (from 1 April 2026) and voluntary above R120,000.

What is the VAT threshold for foreign digital service providers in South Africa?

Foreign suppliers of electronic services must register once their electronic services supplied in South Africa exceed R1 million in any 12-month period.

Do foreign SaaS companies have to register if they only sell to businesses?

Since 1 April 2025, a foreign supplier that supplies electronic services exclusively to South African VAT-registered vendors is excluded from the regime. If it also sells to consumers or unregistered businesses, the exclusion doesn't apply.

Are exports of software services zero-rated?

Some services supplied to non-residents can be zero-rated, but the rules have conditions. Confirm the treatment for your specific customers with a tax practitioner.