GUIDE TO: Calculating import duties and VAT
The price you pay a foreign supplier is just one of the expenses incurred for import. On top of the cost price of your imported goods you will need to add your freight costs, as well as the import duty tax and VAT.
This will have a large impact on the landed cost of your goods and your profitability. If you are a VAT registered vendor, you may claim the VAT back. You can access calculators to calculate the final cost of your goods by clicking here.
Let’s take a closer look at how import duties and VAT are calculated.
How to calculate import duties
Customs can charge import duties in four ways, namely:
- Free (no import duty or tax payable);
- Rated or specific;
- Ad valorum; or
- Compounded (combination of rated and ad valorum)
The table below provides an example of how each duty works.
| Type of Duty | Example |
|---|---|
| Rated or Specific | 10 cents per square meter or 3 cents per dozen |
| Ad Valorem (Fixed percentages of the value) | 10% of the value or 25% of the value |
| Compound (combination of rated and ad valorem duties applicable to goods mentioned in the same tariff heading) | 20% + 8 cents per kg or 50 cents per square meter up to 20% of the value |
In the Customs Tariff Book (a document listing all traded items and their duties), each item is classified by a tariff code or HS code that is the same throughout the world. Each tariff code is associated with a specific duty tax. You can access the complete tariff book in the form of our tariff code directory. Use this import duty directory to look up the duty tax you will be liable to pay.
Note: The rate of duty you are liable to pay may differ depending on the country you are importing the goods from. If you are importing from an EU, EFTA, MERCOSUR or SADC country, or the United Kingdom, and your import is accompanied with a certificate of origin, different rates apply. Make sure that you look up the correct rate of duty.
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Calculating import duties
You now have the duty tax percentage you will pay. Take the cost of the goods and add this amount to work out how much tax you will pay. For example:
Rated or Specific Calculation:
Volume of goods is 1000m2, Duty Tax is 30c per M2.
Total duty tax is 1000 x 30c = 30 000cents or R300.
Ad Valorem Calculation:
Cost of goods is R1000, Percentage duty tax is 25%
Total duty tax is R1000 x 25/100 = R250
Calculating import VAT
Now that you have your import duty you can calculate how much VAT you are liable to pay. VAT on imports work differently to local transactions in that a 10% upliftment and the duty payable on the import is also taxed. The total taxable amount is called the added tax value (ATV)
The VAT must be paid before your goods are cleared at customs. Here is an example of an import VAT calculation:
Product price on commercial invoice (e.g. R100)
+ 10% upliftment on commercial invoice value (e.g. R10)
+ duty tax (e.g. if duty tax percentage is 20% then R20 is added)
= Taxable total or ATV (e.g. R130).
15% VAT is levied on the Total amount. (in this example the VAT is R19.50)
You can perform this calculation automatically using our import duty and VAT calculator.
Find more help with your import logistics, original resources, leading-edge training, and assistance with customs licenses on Trade Logistics.
