The first invoice from an African software vendor raises fewer tax problems than most finance teams expect, and more foreign-exchange and paperwork problems than they plan for. A European company paying a vendor abroad for software development usually withholds nothing itself and accounts for its own VAT under the reverse charge. Friction sits on the vendor's side of the border: which currency it may invoice in, where the money can be received, and what its bank wants to see before releasing it.
This is a list of questions, not advice. Everything below is general information drawn from the named authorities, not tax or legal advice, and rules in several of these countries changed in the past two years. Put the specific contract in front of your tax adviser before the first payment.
Key takeaways
- The EU side is usually simple: services bought from a non-EU vendor are taxed where you are established, and you account for the VAT yourself (Directive 2006/112/EC, Articles 44 and 196).
- Withholding tax in the vendor's country mostly bites when a local entity pays, or when the payment is a royalty. Ask which one your contract creates.
- Currency of invoicing is a legal question in Ghana and a practical one in Nigeria, Egypt and Ethiopia, where recent FX reforms are still being codified.
- Payment fees and delays come from banks and compliance checks, not from the invoice amount. Ask the vendor for its receiving-bank route before signing.
- Several of the sources below are secondary summaries because central-bank and revenue-authority sites were unreachable when this was researched. Treat those figures as pointers to confirm.
Question 1: which currency is on the invoice, and who carries the exchange risk?
Start with what the vendor is allowed to do. Kenya's central bank guidelines state that residents and non-residents may "invoice for their goods and services in Kenya Shilling or foreign currency", and that foreign currency accounts are allowed (Central Bank of Kenya, Guidelines on Foreign Exchange, 2002). At more than twenty years old, it is a reason to ask the vendor's bank whether anything has been layered on since.
Ghana is stricter at home. Ghana's central bank says the Foreign Exchange Act 2006 (Act 723) "prohibits the pricing, advertising and receipt or payment for goods and services in foreign currency in Ghana". That notice, which is undated on the page, covers transactions inside Ghana. It does not by its own wording address a Ghanaian company invoicing a foreign client. Ask your vendor how its lawyers read it for export contracts.
For Egypt, the IMF described the reform as a move "toward a credible flexible exchange rate regime", which "started with unification of the exchange rate between the official and parallel markets" (IMF press release 24/69, March 2024). If your contract was priced before that unification, check whether the pound price still makes sense.
Our reading: invoice in euros or dollars unless the vendor's own rules say otherwise, and agree who pays when the vendor's bank converts. Pricing in a local currency hands you a hedging problem you did not budget for.
Question 2: can the money actually leave, and can the vendor keep it?
For the buyer, repatriation rules are mostly the vendor's headache. They become yours when a payment is delayed.
Ethiopia is the clearest case of a rule that moved. The National Bank of Ethiopia's public notice of February 2026 relaxes the foreign exchange directive FXD/01/2024 and refers to a revised directive, FXD/04/2026. It lists a set of relaxations, including that service exporters may hold 100% of export proceeds in retention accounts for an indefinite period (National Bank of Ethiopia). For a European buyer that is good news: the vendor can receive a euro payment and need not convert it at once.
Nigeria's central bank published a new FX manual. Press reports say the fourth edition takes effect on 1 June 2026 and replaces the 2018 edition (BusinessDay, 16 May 2026), and a finance-sector commentary says it codifies operational rules for service exports and technology-sector remittances (Open Space Finance). Detail is unconfirmed: the CBN site was unreachable during research. Ask the vendor for the clause it relies on.
Kenya's guidelines let authorised dealers facilitate payments between residents and non-residents, with management consultancy payments needing the agreement, the invoice and evidence that withholding tax was handled. That list is a good template of what a vendor's bank may ask you for.
Question 3: how will the money travel, and who pays the fees?
The Financial Stability Board's 2025 report describes Sub-Saharan Africa as slower than other regions for receiving wholesale cross-border payments, with some signs of progress (we could not re-open the PDF, so check the wording there). Globally, over 90% of wholesale payments are credited within one business day. The report says capital controls processing can delay crediting "by hours or even days" (FSB, 9 October 2025).
A caution about that figure. Wholesale here means large-value payments, not routine supplier invoices, so a monthly invoice for a small team may sit below the threshold and behave differently. Use it as a direction, not a forecast for your payment.
Practical items to settle:
- Fee instruction: "OUR" (sender pays all charges) or "SHA" (shared). Decide it in the contract.
- Which currency account the vendor receives into, and whether it is a domiciliary account.
- Whether the vendor can supply the supporting documents its bank needs, such as the signed service agreement and your invoice.
Question 4: does anyone withhold tax, and does a treaty reduce it?
Withholding tax (WHT) is a deduction from a payment, made by the payer and sent to the tax authority on the recipient's behalf. Who the payer is decides everything. A European parent paying an African vendor from Europe generally has no local withholding obligation. A local subsidiary or branch paying the same vendor often does.
The published non-resident rates for service-type payments show how wide the range is:
| Country | Rate on service-type fees to a non-resident | Source | |---|---|---| | Kenya | 20% (management, professional, consultancy, contractual fees) | Kenya Revenue Authority | | Ghana | 20% (management and technical service fees, and other services) | Ghana Revenue Authority | | Egypt | 20% (services), treaty rate claimed later by refund | PwC summary | | Nigeria | 10% (technical, professional, management, consultancy fees), final tax | PwC summary | | South Africa | No domestic WHT on fees to non-residents; 15% on royalties | PwC summary; SARS |
Rates change, apply to specific payment types, and the summaries date from 2026 reviews. Software can also be classed as a royalty, depending on the licence, which moves the payment into a different rate. That classification is the item to put to a tax adviser.
Treaties can lower these rates. Most treaties follow the OECD Model Tax Convention as a template. Article 5 defines a permanent establishment, Article 7 allocates business profits and Article 12 covers royalties. The OECD published a 2025 update in November 2025, with Article 5 Commentary changes on home-office permanent establishments (OECD). That matters if the vendor's engineers work from a country other than where the contract sits.
Treaty relief is not automatic. SARS says a Withholding Tax on Royalties Declaration is needed to claim an exemption or reduced rate, and that without a valid form the 15% applies. In Egypt, PwC reports that the 20% is withheld first and the recipient claims a refund. Ask whether the contract has a gross-up clause, which makes the payer cover any tax withheld so the vendor receives the agreed sum.
Nigeria deserves a flag. Nigeria's Tax Act 2025 was signed on 26 June 2025 and is effective 1 January 2026. EY's alert says non-resident suppliers must register for VAT and withhold VAT, and KPMG's summary describes withholding tax as acting as a final minimum tax for non-residents; the two firms word the non-resident income tax rules differently, so get a tax adviser to confirm which applies. PwC's Nigeria page does not mention the Act. Check which regime applies to the payment date.
Question 5: what does your own VAT return need?
This is the easiest part. Under the EU VAT Directive, the place of supply of services to a business is where that business is established (Article 44). Where the supplier is not established in your Member State, Article 196 makes the customer liable: VAT "shall be payable by any taxable person... to whom the services referred to in Article 44 are supplied". In practice you report the VAT as output and, if you have full deduction rights, claim it back as input in the same return. The vendor does not charge VAT.
Check the invoice carries your VAT number and a clear service description, and ask your national tax authority for its own formalities. The Directive is the common base, and each Member State implements it with its own forms.
The mirror case matters for local subsidiaries. If your buyer is an Egyptian branch, the Egyptian Tax Authority says a resident registered taxpayer must self-account for VAT by reverse charge on services from non-resident vendors.
Question 6: what paperwork travels with each payment?
The Central Bank of Kenya's guidelines name the agreement, the invoice and evidence of withholding tax as the documents for management consultancy payments. Other countries' banks may ask for similar sets. A precise invoice description, such as the service, the period and the agreement date, gives the vendor's bank less to query. Keep the signed agreement, invoice and proof of tax treatment together for each payment.
The strongest counterargument
A fair objection: most of this does not apply to a modest contract paid from Europe by wire, and over-engineering the process costs more than a delayed payment. For a single small engagement, that is probably right. These questions earn their keep when the contract runs for years, when a local subsidiary of yours is the payer, or when the vendor sits in a country whose FX rules changed in 2026.
Buyer guidance
Before the first invoice, ask the vendor and your tax adviser:
- Which currency and receiving account, and what in the vendor's country permits it? Get the rule reference.
- Who is the paying entity? If a local subsidiary pays, WHT rates and treaty forms come into play.
- Is any part of the fee a royalty or licence? Split it from service fees in the contract.
- Does the contract include a gross-up clause, and who bears bank fees?
- What documents will the vendor's bank want from you, and by when?
- Which of the rules above changed since 2025 for the vendor's country, and does the vendor's finance contact confirm the current version?
To compare vendors by country before these conversations, the directory and the Kenya country page give a starting profile, and find-partner helps build a shortlist. Intelligence covers wider market context. None of these pages substitutes for the authorities named here.
Frequently asked questions
Does a European company have to withhold tax when it pays an African software vendor? Usually not on service fees if the payer is in Europe and has no local presence, though the payment may be subject to withholding in the vendor's country if a local entity pays or if it is a royalty. Check with a tax adviser for the specific contract.
Do I charge or pay VAT on an invoice from a vendor outside the EU? No VAT is charged by the vendor. Under Articles 44 and 196 of Directive 2006/112/EC, you account for the VAT yourself under the reverse charge.
Can an African vendor invoice in euros? It depends on the country. Kenya's central bank guidelines allow foreign-currency invoicing, while the Bank of Ghana restricts foreign-currency pricing inside Ghana. Ask the vendor which rule it relies on.
What is a treaty relief certificate? It is documentation, such as a residence certificate or a declaration form like SARS's royalty declaration, that a recipient gives the payer or the authority to claim a lower treaty withholding rate.
Sources
- Directive 2006/112/EC, consolidated 1 January 2025, Publications Office of the European Union (EUR-Lex)
- Withholding tax, Kenya Revenue Authority
- Withholding tax, Ghana Revenue Authority
- Withholding Tax on Royalties return, external guide, South African Revenue Service
- Public notice on relaxation of foreign exchange directives, National Bank of Ethiopia
- Guidelines on Foreign Exchange, Central Bank of Kenya
- Prohibition of pricing and payment for goods and services in foreign currency, Bank of Ghana
- G20 cross-border payments, consolidated progress report 2025, Financial Stability Board
- Nigeria: corporate withholding taxes, PwC Worldwide Tax Summaries
- Egypt: corporate withholding taxes, PwC Worldwide Tax Summaries
- Nigeria Tax Act 2025 signed: highlights, EY
- 2025 update to the OECD Model Tax Convention: summary of key changes, OECD
- VAT guide for digital and remote services, Egyptian Tax Authority
- IMF press release 24/69: Egypt, International Monetary Fund