South African VAT Obligation for Foreign Businesses

For foreign businesses operating in South Africa, South African Value Added Tax (“VAT”) obligations (or Goods and Services Tax (GST) as known in many other jurisdictions) often finds itself in the shadow of the more pertinent permanent establishment and concomitant South African corporate income tax obligations. These two obligations are, however, of equal importance with VAT non-compliance attracting penalties of equal damage to corporate income tax non-compliance, if not worse. It is very possible, and it indeed happens, that a foreign business has no corporate income tax presence or permanent establishment in South Africa but does have a VAT obligation. While legally these positions can co-exist independently, a VAT obligation often raises suspicion with revenue authority officials in the absence of a corresponding corporate income tax presence where not properly managed.