Registration of foreign entities

Section 23(2A) is a new provision aimed at alleviating the administrative difficulty for foreign entities required to register for VAT in South Africa. If one or more foreign entities forming part of the same “group of companies” as defined under section 1(1) of the Income Tax Act are required to register for VAT, section 23(2A) allows for a single branch VAT registration for all those separate entities. This firstly requires that one of the entities in the group must already be conducting an enterprise in South Africa and be registered as a vendor (main registered vendor). The main registered vendor may then register a separate branch or division for all the foreign entities. The primary purpose of the separate registration is to ensure that a distinction can be drawn between the supplies made by the main registered vendor and the other foreign entities. The main vendor must submit a VAT return to account for its own VAT and a separate VAT return must be submitted for the branch or division to account for the VAT of all the other entities. The normal VAT rules apply to supplies made between entities in the same group and if those supplies form part of their enterprise activities in the Republic, the VAT on such supplies must be accounted for in the VAT return submitted for the branch or division. There are certain conditions that apply, for instance, the branch will be treated as an enterprise separate from the main registered vendor and the Commissioner may cancel the branch registration under specified circumstances. Any of the non-resident group companies may, however, elect to register independently as a vendor in South Africa, and not form part of the branch registration under the new dispensation.

Registration of foreign electronic service providers – A new provision was inserted into section 23(1A) with effect from 5 January 2023 to the provide that a foreign electronic services provider is not required to register as a vendor if the total value of taxable supplies of R1 million in any consecutive 12-month period has been exceeded solely as a consequence of abnormal circumstances of a temporary nature. The amendment is aimed at achieving parity with the concession granted to domestic vendors.

Source: gov.za

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