Africa VAT Rules for Non-Resident Digital Suppliers | Key Compliance Insights

Digital transformation is one of Africa's leading development drivers of economic growth. The digital economy, and, thus, digital services and transactions, especially those involving foreign digital suppliers, play a critical role in reshaping the business and consumer market.

As more people have access to the internet and opportunities to utilize digital services, tax authorities across the continent are taking necessary steps to capture revenue from cross-border transactions involving digital services. Therefore, digital service suppliers constantly encounter changes in existing VAT rules or the introduction of new ones in African countries. 

Current VAT Landscape for Non-Resident Digital Suppliers

Non-resident digital suppliers must navigate diverse VAT rules from country to country. As one of the most developed countries, South Africa was at the forefront of the tendency to subject digital services to VAT by introducing rules in 2014. The scope of services covered was restricted to only explicitly listed digital services, and the VAT registration threshold was set at ZAR 50,000 (around USD 2,700). 

However, in 2019, the scope and definition of digital services were expanded to include any supply of digital services, and only certain services were exempt from the rule. Additionally, the registration threshold for non-resident service suppliers was increased to ZAR 1 million (around USD 54,800).

Egypt introduced VAT on digital services in 2016, subjecting those services to a 14% VAT rate. The VAT registration threshold in Egypt is EGP 500,000 (around USD 9,900).

Mozambique adopted VAT rules for non-resident services suppliers in 2016, effective January 1, 2017. Like South African rules, the rules do not distinguish between B2B and B2C supplies, and the applicable VAT rate is 16%. There is no VAT registration threshold, meaning that non-resident suppliers must register when they first supply to consumers in Mozambique.

Other countries with VAT rules for non-resident digital services suppliers include Angola, Benin, Cape Verde, Côte d’Ivoire (Ivory Coast), Ghana, and many others.

Recent Developments and Legislative Changes

The number of countries introducing VAT rules for digital services, affecting both resident and non-resident digital suppliers, has increased. Therefore, more countries will implement such regulations. Several countries introduced these rules in 2024, such as Ethiopia, the Democratic Republic of Congo, and Senegal.

Tanzania, a country comprising two entities, Mainland Tanzania and Zanzibar, a semi-autonomous region of Tanzania, has a unique VAT regulatory landscape. Mainland Tanzania has had VAT rules in place since 2022, when it imposed an 18% VAT rate without setting a VAT registration threshold. 

In 2024, Zanzibar changed its VAT rules for non-resident digital services providers 2024 and increased the applicable VAT rate from 15% to 18%. Additionally, the authority to collect VAT from digital services supplied by non-residents shifted from the Zanzibar Revenue Authority (ZRA) to the Tanzania Revenue Authority (TRA). This should contribute to a more harmonized system for foreign digital companies. In contrast, foreign companies operating in other sectors must consider different rules.

Additionally, Rwanda and Botswana announced that they will implement rules for foreign digital service suppliers. Liberia, the country with a GST regime in place, announced its intention to replace it with the VAT regime, which could affect non-resident suppliers. However, it remains to be seen what the transition to a new tax regime will bring.

Common Challenges and Risks for Foreign Digital Suppliers

The primary challenge for non-resident digital suppliers is that the African VAT regulatory framework is rapidly changing. Countries are no longer willing to let digital sales escape taxation simply because the supplier is based abroad. Governing bodies sometimes decide to implement rules and regulations without providing sufficient or clear enough guidance, which leaves taxable persons at risk of not complying and not fulfilling their obligations.

Additionally, some countries may not distinguish between B2C and B2B transactions. In contrast, in other cases, a reverse-charge mechanism applies for B2B transactions, where the VAT liability is shifted to the buyer of services.

Tracking all the changes regarding the applicable VAT rates or VAT registration threshold is also tricky for digital services suppliers, as Tax Authorities do not always transparently communicate these changes. As seen in the Tanzania example, the non-uniformity of rules can also result in non-compliance with regulations, which leaves foreign companies vulnerable to penalties.

Conclusion

As the African digital transformation and economy develop, cross-border transactions are becoming the norm, leading national Tax Authorities across the continent to upgrade, adjust, and, in some cases, redefine VAT regimes to ensure that the revenue is captured regardless of whether the digital services suppliers are local or foreign.

The trend of implementing VAT rules for non-resident service suppliers is evident, and new legislative developments aim to simplify compliance and establish more harmonized approaches in some regions. Nevertheless, foreign suppliers should be proactive and take all necessary steps to remain well-informed and up-to-date with regulatory changes to manage their VAT obligations effectively in a rapidly changing environment.

Source: PwC, South Africa Revenue Services, Egyptian Tax Authority, VATabout - Tanzania - VAT Updates, VATabout - Ethiopia Introduces VAT Rules for Foreign Digital Services Providers – Key Regulations Explained, VATabout - Senegal - VAT Liability of Foreign Providers of Digital Services, VATabout - Botswana to Introduce VAT on Foreign Digital Services in 2025, VATabout - Rwanda Approves New VAT & Digital Services Tax Rules for 2026