VAT On Imported Services In Africa – Why Consumption And Reverse Charge Concepts Remain Crucial

Abstract

As exports and imports of services continue to grow globally, Value Added Tax (VAT) on imported services has also taken a centre stage in most countries. Unlike goods, determining the place of consumption for services is often a contentious issue and a source of VAT controversy in many countries. In resolving these controversies, African courts, with a few exceptions, have established a visible criterion for determining the place of consumption of cross-border service transactions that aligns with the OECD International VAT/GST Guidelines. Where consumption is not at issue, most African countries have opted to deploy a reverse charge mechanism blended with a “register and comply” requirement for the foreign supplier in order to administer and collect VAT on the foreign supply (imported service). In this article, the author argues that African countries should deploy a reverse charge mechanism for B2B transactions and only use a “register and comply” requirement by non-residents for B2C services.