Zero-Rating, Real Rewards: How Exports Can Cut Your VAT Bill
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VAT (Value-Added Tax) is a form of tax vendors pay on the ‘value added’ when providing a good or service. But there’s a big exception all business accountants must know about: if you export goods and services and they are consumed outside South Africa, these can qualify for zero-rated VAT. But only if you know how to prove it.
When your supply is zero rated it means:
You do not pay output VAT to SARS
You can still claim input VAT on your expenses.
Lets break down what that means and how to get it right.
What Services Are Zero-Rated for VAT?
According to Section 11(2)(l) of the VAT Act, a service can be zero-rated if:
It’s supplied to a person who is not a resident of South Africa, and
The service is used or consumed outside South Africa.
👉Remember: Where the service is consumed matters more than where it's supplied.
✅ Examples of what can be zero rated supplies:
A South African tax consultant helps a US-based company with US tax compliance.
A Johannesburg manufacturer sells precision tools to a company in Botswana and delivers them via a courier company to Gaborone. The tools leave the country within 90 days
A SA-based software developer writes code for a UK company’s internal system, delivered via cloud.
❌ Examples that do NOT qualify as zero rated supplies:
A South African attorney assists a UK client in drafting contracts to be used in SA.
A local tour operator sells a package to a foreign tourist for use in South Africa.
A non-resident pays for conference catering in Cape Town.
👉Remember: Even if the supply is to a non-resident, if the benefit or outcome is used inside SA, VAT must be charged at the standard 15%.
What is Direct and Indirect Export?
If you sell movable goods that are physically exported from South Africa, they can be zero-rated under Section 11(1) of the VAT Act. There are two ways this happens:
The Seller Arranges the Transport i.e. Direct Exports
If your client delivers or ships the goods themselves (or through your own logistics partner) to an address outside South Africa, the sale qualifies as a direct export. To zero-rate, you must:
✅Export the goods within 90 days of the invoice or payment
✅Keep proof of export as per the list below i.e. waybill, customs docs, invoice, payment confirmation, etc.
For example:
You sell machinery to a customer in Namibia and send it via your chosen freight forwarder. That qualifies as a direct export.Indirect Exports – The buyer collects
If a foreign buyer picks up the goods in SA and handles export themselves, it's an indirect export. This can also be zero-rated, but only if:
The buyer is a “qualifying purchaser” under SARS rules
You follow the Export Regulation procedures
You obtain all supporting export documents within 90 days.
Otherwise? You must charge VAT at 15%, and the client can apply for a refund later via the VAT Refund Administrator.
Documentation Requirements: Proving the Zero-Rating
SARS expects proof that the goods or services are indeed qualify for zero rating. No documents = no zero-rating.
🗂️ For goods you will need to have:
Invoice marked as zero-rated under Section 11(1)
Client contract/order
Customs export declaration (SAD500)
Proof of foreign payment
Proof that goods were received outside SA, delivery documents (e.g., waybill, courier logs).
🗂️ For services provided you will need:
Non-residency documents (e.g., passport, company registration)
Contract showing offshore delivery or emails or reports proving offshore use
Proof of foreign payment
Confirmation client was not present in SA at the time of service.
You must keep records for at least 5 years, and you only have 90 days from the invoice/payment to obtain all documentation, unless SARS grants an extension.
The DOs and DONTs
What You Should Do:
Confirm your client’s residency status. Make sure they are truly a non-resident for VAT purposes, not just a foreign-sounding name or invoice address.
Check where the goods or services are used. The service must be consumed outside South Africa, or the goods must be physically exported.
Get all required export or delivery documents within 90 days. This includes invoices, customs declarations, proof of payment, and delivery confirmations.
Clearly mark your invoices with the correct zero-rating reference—for example, “Zero-rated in terms of Section 11(1)” for goods, or “Section 11(2)(l)” for services.
Keep your records for five years. SARS can ask for supporting evidence long after the transaction.
What You Should Avoid:
Don’t assume that every foreign customer qualifies for zero-rating. Where the product or service is used is more important than where the customer is based.
Don’t ignore documentation. If you can’t prove the export or offshore use, SARS will disallow the zero-rating—and you’ll owe 15% VAT.
Don’t delay in gathering your paperwork. Missing the 90-day deadline can result in having to charge VAT, even if the goods or services were used offshore.
Don’t forget to apply the correct VAT treatment when the client collects goods in SA. Indirect exports have specific rules and must follow SARS’s Export Regulation process to be zero-rated.
Don’t discard your VAT backup too soon. If your documentation is missing during an audit, you’ll be liable, even years later.
Help Your Clients Export Smarter
Helping clients correctly apply zero-rated VAT on exports means:
They keep more of their money
You help them stay compliant with SARS
You become a more valuable advisor.
Not sure if your scenario qualifies? When in doubt, charge 15%, and review the documentation before claiming zero-rating.
Want a checklist version of this article? Let me know, and I’ll prep a ready-to-print resource for your practice or clients.
✅ Checklist: How to Zero-Rate Exported Services Without Risk
Use this checklist before applying 0% VAT on any exported service. Tick each item to ensure SARS compliance and avoid costly mistakes.
1. Client Eligibility
☐ The client (buyer) is a non-resident of South Africa
☐ The client (buyer) has a registered address outside SA
☐ If an individual: the client (buyer) was physically outside SA when service was delivered
☐ If a business: the client (buyer) has no fixed place of business or permanent establishment in SA
2. Nature of the Service
☐ Service performed is not connected to physical goods located in SA
☐ Service is not related to immovable property in SA (e.g., buildings, land)
☐ Service was not physically performed in SA, unless SARS allows zero-rating based on offshore use
3. Proof of Offshore Use or Consumption
☐ Contract clearly states the service is intended for offshore use
☐ Project brief or scope outlines delivery to a foreign client
☐ Communication records (emails, Zoom calls) show remote engagement
☐ Deliverables were sent electronically or used abroad
☐ No part of the service was used or applied in SA
4. Payment Evidence
☐ Payment was made from a foreign bank account
☐ Invoice was paid in foreign currency (preferred, but not required)
☐ Client’s foreign tax or VAT number is recorded (if applicable)
5. Invoice Requirements
☐ Supplier’s VAT number is listed
☐ Client’s name and foreign address appear
☐ VAT rate is shown as 0%
☐ Invoice includes this statement:
“Zero-rated supply in terms of Section 11(2)(l) of the VAT Act”
☐ Invoice and delivery dates are clearly stated
6. Supporting Documentation on File
☐ Signed contract or engagement letter/order confirmation
☐ Proof of client’s non-residency (e.g., passport, business registration)
☐ Evidence of offshore delivery (e.g., emails, reports, cloud folders)
☐ Export documentation (for goods): customs forms, waybills, delivery proof
☐ Proof of foreign payment received
☐ Project outcome or final service confirmation.
Read more about zero rating and the requirements in the following SARS guides:
