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What does Vat law say about foreign companies holding events in South Africa?

by , 03 January 2014
You know you should register for Vat if you're running an enterprise, but what about foreign companies holding events in South Africa? Read on to find out what Vat law says about this...

If you want to determine whether your business should register for Vat, the first point is to determine whether or not you're conducting an enterprise.

According to the Practical Vat Loose Leaf Service, the word enterprise is really a collective word and refers to whether an activity is carried:

  • On a regular or continuous basis
  • Inside South Africa OR partly inside South Africa or
  • Where something is received in exchange for you supplying goods or services – that something may or may not be money and
  • Where a profit may or may not be made.

If the activities which you're carrying out meet the above requirements, for Vat purposes you're carrying on an enterprise.

What about foreign companies? Are they also carrying on an enterprise when arranging events in South Africa?

Here's what the law says about foreign companies holding events in South Africa

'Where foreign businesses arrange to hold conferences, concerts, congresses and the like in South Africa, it's important to understand whether they will be liable for Vat within South Africa,' cautions the Loose Leaf Service.

Even though the events will be once-off and there may or may not be a charge to the attendees, SARS says such foreign businesses are in fact carrying on an enterprise.

In supporting their view, let's look at how this complies with the Vat Law:

Where a foreign business arranges its event in South Africa. Is it:

  • On a continuous or regular basis? Yes, says SARS, as the foreign business will undertake a series of activities in order to arrange their event here.
  • Inside or partly inside South Africa? Obviously, yes.
  • Receiving something in return for its service? Yes, either in the form of entry fees, registration fees or even advertising income.
  • Profit is irrelevant!

It follows, then, that a foreign business will be carrying on an enterprise in South Africa for such conferences, congresses, concerts or the like. And if their total income from the event is more than R1 million, they will have to register for Vat here – even if it is for a once-off event!

Remember, ignorance of the law is not an excuse. Make sure you comply with your Vat obligations if you're a foreign company holding events in South Africa.

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