Zero-rated exports and services to non-residents (South Africa)

South African freelancers and small businesses increasingly sell to clients abroad: design work for a London agency, software for a client in Nairobi, goods shipped to Gaborone. In many of these cases VAT is charged at 0%. The VAT Act calls this a zero-rated supply, and section 11 lists when it applies.

This guide covers zero-rated exports of goods and services to non-residents, the exceptions that catch people out, what the tax invoice must show, foreign-currency invoices, and where the sales go on your VAT201. The free invoice generator prints the right zero-rating wording when you choose who your client is.

Zero-rated, exempt or no VAT

These three can look alike on an invoice, but they're treated differently:

Zero-rating is still a taxable supply. You report it on your return, and you can still claim back the VAT you pay on the costs of making it.

Exported goods: section 11(1)(a)

Goods you export from South Africa are zero-rated under section 11(1)(a) of the VAT Act. The condition is documentary proof: SARS expects you to keep the export documents and proof that the goods left the country. SARS's interpretation notes on exports set out which documents it accepts.

Exported goods go in field 2A of your VAT201, on their own. The VAT201 guide makes a customs code mandatory for that field. Invoice Native doesn't record customs codes, so keep yours with your export documents.

Services to non-residents: section 11(2)(l)

Services you supply to a non-resident are zero-rated under section 11(2)(l), with three important exclusions. The zero rate doesn't apply to services:

• directly connected with land in South Africa, such as work on a building here;
• connected with movable property in South Africa, with some exceptions;
• supplied to a non-resident, or a person using the service, who is in South Africa when the service is rendered.

So a Johannesburg developer building an app for a client in Germany usually zero-rates it. A tour guide showing that same client around Cape Town charges 15%, because the client is here when the service happens.

Services physically performed outside South Africa can also be zero-rated, under section 11(2)(k). Services go in field 2 of your VAT201, together with other zero-rated supplies such as basic foodstuffs.

What the invoice must show

A zero-rated supply always needs a full tax invoice. The VAT Act doesn't allow an abridged invoice for it, even for a small amount. So show:

• the title "Tax Invoice", your name, address and VAT number;
• your client's name and their foreign address, which SARS's Binding General Ruling 21 accepts for a non-resident;
• a serial number and the date;
• a full description and the quantity;
• the value, with VAT shown at 0%.

It also helps to say why there's no VAT. In Invoice Native, choose "Goods exported from South Africa" or "Services to a client outside South Africa", and the invoice prints "Zero-rated export of goods (VAT Act s11(1)(a))" or "Zero-rated: services to a non-resident (VAT Act s11(2)(l))". The VAT column on each line reads "0%".

Invoicing in foreign currency

Zero-rated supplies get a useful exception: a tax invoice for them may be wholly in foreign currency. You can bill your London client in pounds without converting to rand.

If an invoice includes any standard-rated line, it must show the amounts and the VAT in rand. You may show the foreign amount and the exchange rate as well. Under SARS's Binding General Ruling 11, you can use:

1. the daily rate on the date of supply;
2. the daily rate on the last day of the previous month; or
3. the average rate for the previous month.

Options 2 and 3 aren't allowed if the currency moved by 10% or more in that month. The rate can come from the South African Reserve Bank, Bloomberg or the European Central Bank.

Worked example

A Cape Town web developer, registered for VAT, bills an agency in London:

Zero-rated: services to a non-resident (VAT Act s11(2)(l)).

The agency is outside South Africa, the work isn't connected with land or goods here, and nobody from the agency is in South Africa while the work is done. The invoice can stay in pounds. Add your SWIFT code so the agency can pay from abroad.

Checklist

• ✅ Goods: proof they left South Africa, kept with your records
• ✅ Services: client not resident, not in South Africa during the work, and no link to land or goods here
• ✅ A full tax invoice, with your client's foreign address
• ✅ The zero-rating reason on the invoice and "0%" on each line
• ✅ Foreign currency only when every line is zero-rated
• ✅ Exported goods in field 2A, zero-rated services in field 2

For the rest of the tax invoice list, see what a tax invoice must show. Rules can change, so check SARS's guidance or ask a registered tax practitioner about your situation. Invoice Native does not provide tax advice.