So a South African Company is Providing Digital Services Internationally and Using Stripe for Payments – What Could Possibly Go Wrong?

Digital businesses are booming – from SaaS platforms to online coaching, e-commerce to e-learning. With this global reach, many South African entities are discovering that selling to customers around the world is just a Stripe account away. But where there’s revenue, tax authorities tend to follow…

In this edition, we unpack the hidden tax traps for South African companies providing digital services cross-border, especially when platforms like Stripe are involved.

What is Stripe?

Stripe is an online payment processor that allows businesses to accept payments in multiple currencies from customers around the world. It integrates easily with websites and platforms, and is a favourite of SaaS businesses, coaches, e-commerce vendors, and content creators.
However, Stripe does not manage your tax compliance. It does not determine where VAT or sales tax should apply, calculate it, collect it, or remit it to the relevant authorities. That responsibility lies with the business.

When Do You Have to Register for Foreign VAT

Many countries have implemented rules requiring foreign suppliers of digital services to register for VAT or GST in their country, even if the supplier has no physical presence there.
Generally, you must register for VAT in another country if:

• You are supplying digital services (such as software, streaming access, or online courses)
• Your customers are individuals or non-VAT-registered businesses (B2C) (: although some countries impose VAT on B2B transactions as well)
• Your customers are located in a jurisdiction with a digital VAT regime
• Your sales exceed the local threshold for mandatory VAT registration (which may apply from the first transaction)

Examples of countries with digital VAT rules for foreign suppliers include:

• The European Union
• United Kingdom
• Australia and New Zealand
• Canada
• South Korea
• Norway and Switzerland
• Singapore and Malaysia

Importantly, many African countries have also implemented digital services VAT provisions. For example:

• South Africa has required foreign digital service suppliers to register for VAT since 2014
• Kenya and Nigeria have introduced VAT obligations for non-resident digital service providers
• Ghana and Uganda have both adopted similar rules
• Zimbabwe introduced digital services rules in 2020 and Tanzania in 2022.

In short, the direction of travel is clear: more countries are taxing digital services, and expecting foreign suppliers to comply.

What Happens If You Don’t Register?

If you meet the criteria for foreign VAT registration and fail to comply, the consequences can be serious.

• The company becomes liable for the uncharged VAT, even if it wasn’t collected from the customer
• Penalties and interest may be imposed on the unpaid VAT
• Some countries will block your access to their market or issue compliance notices to your payment platform
• Ongoing non-compliance could lead to reputational damage or difficulty in securing future business relationships

In short, failure to register and charge the appropriate VAT can turn what seemed like straightforward Stripe revenue into an expensive tax headache.

Other Tax Considerations

While VAT is the main exposure for digital services, there are other tax issues to consider:

1. Permanent Establishment Risk

Digital services typically do not create a taxable presence abroad unless you have people, agents, or servers in the jurisdiction. But where you do, the local authorities may seek to tax your profits as well.

2. Withholding Taxes

Withholding taxes are not usually levied on payments for digital services, but some countries in Africa and Asia do apply withholding on service fees, especially in a B2B context. Local rules must be checked carefully.

3. South African VAT

Digital services sold to foreign customers may qualify for zero rating in South Africa, but only if strict conditions are met, including proving the customer is outside SA and is using the service outside SA.

4. Exchange Control and Stripe

Repatriating income received through Stripe to South Africa must comply with SARB requirements. Funds must be channelled via authorised dealers, and some forms of Stripe usage may raise queries with local banks.

5. Transfer Pricing

Where a South African entity is part of a group and is developing or licensing software, ensure that pricing is documented and supports arm’s length returns.

What Should SA Digital Businesses Do?

• Map out your customer base by location and determine whether your customers are individuals or businesses
• Assess the VAT thresholds and digital tax rules in each relevant country
• Implement compliant invoicing processes and check whether local registration is required
• Consider using tax automation tools or platforms that support VAT compliance
• Ensure that your contracts and terms of service reflect the correct tax treatment
• Speak to a tax adviser before expanding into new jurisdictions

Conclusion

Selling digital services internationally opens up huge growth opportunities for South African businesses. But unlike Stripe, tax obligations don’t scale automatically. Understanding and managing your VAT exposure in foreign markets is crucial to avoid costly penalties and ensure your business is globally compliant.

If you are unsure whether your business needs to register for VAT abroad or how to manage international tax compliance, please get in touch. We advise digital businesses across Africa and globally on how to grow sustainably – and stay on the right side of the taxman.