Taxation of low value imports, including e-Commerce platforms such as Temu or Shein, to South Africa
The allure of affordable fashion and homeware offered by online retailers like Temu and Shein has captivated South African consumers. However, the excitement of receiving your order can quickly dissipate when confronted with the unexpected costs associated with import duties and taxes.
Understanding the New Tax Regime
To accommodate the high volume of e-commerce trade, Customs previously offered a concession for air shipments valued under R500. Importers paid a flat 20% customs duty for simplified processing and faster clearance. VAT was not included in this rate as it was implemented before VAT was introduced on the 30th of September 1991. This 20% concession only applies to goods listed in Schedule 1 part 1 of the Tariff book. It does not cover excise duties, environmental levies, health levies, or other safeguarding levies that SARS has in place on certain specified goods.
This inadvertently benefited online retailers like Temu and Shein who often split larger orders into smaller packages to circumvent higher taxes. However, recognising the unfair advantage this gave foreign retailers over local businesses, the South African Revenue Service (SARS) aims to transition from the current concession-based manual process for handling e-commerce imports to a fully automated system. This will help manage the increasing volume of e-commerce trade, prevent fraudulent practices, and ensure a fair playing field for all traders. The process will be phased in and involve collaboration with stakeholders to improve the tax ecosystem.
Effective September 1, 2024, as a phase 1 interim measure SARS has introduced Value-Added Tax (VAT) alongside the existing 20% flat-rate customs duty.
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VAT on imported goods is calculated based on the Added Tax Value (ATV):
- The ATV is determined as follows: the Customs Value (in South Africa this is the FOB value), plus an additional 10% of the Customs Value, plus any applicable duties on the goods.
- For goods imported from Botswana, Eswatini, Lesotho, or Namibia, and originating from one of these countries, the Customs Value should not include the additional 10%.
- The VAT rate applied to the ATV is 15%, effective from April 1, 2018.
Based on the World Customs Organisation (WCO) guidelines, eCommerce goods are divided into 4 categories. The new VAT ruling will apply to category 3.
| Category 1 | Correspondence and documents with no commercial value are exempt from duties and taxes. These items are eligible for immediate release based on a consolidated declaration, which can be either oral or written (such as a manifest, waybill, or inventory). |
|---|---|
| Category 2 | Low-value consignments that fall below a specified de minimis threshold, for which no duties and taxes are collected. These items qualify for immediate clearance and release using a manifest, waybill, house waybill, cargo declaration, or an inventory list. |
| Category 3 | Low-value consignments that are dutiable (simplified goods declaration) – These goods exceed the de minimis threshold but are still below the value that requires a full declaration. They are subject to duties, with the possibility of using a simplified declaration or being released against a manifest with subsequent simplified clearance procedures. |
| Category 4 | High-value consignments (full goods declaration) – These consignments do not qualify under the three categories above and include goods subject to restrictions. Standard release and clearance procedures apply, including the payment of duties and taxes. |
Conclusion
While the appeal of low prices on Temu and Shein remains strong, it’s essential to be aware of the full cost of importing goods into South Africa. The recent tax changes have significantly impacted the overall cost of purchases from these platforms. Future changes are expected as the next phases are gradually implemented, and this may further impact the import tax regulations.
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