Sars plans to introduce VAT in addition to the current 20% flat rate customs duty by September 1, as an immediate interim measure.
The SA Revenue Service (Sars) has announced new tax changes to the customs import system that clicks into effect on September 1, which will effect Chinese e-retailers Shein and Temu, among others.
Sars plans to introduce VAT – in addition to the current 20% flat rate customs duty by September 1 – as an immediate interim measure.
The South Africa International Ecommerce Association (Saiea), said the early implementation on September 1 did not leave much time for adjustment, and streamlining of processes.
When local retailers import clothing, they have to pay a 45% import tax. The government feels it is only fair that the importing consumer, who is now effectively bypassing the middleman (the local retailers), also faces an import tax to level the competitive play ground.
Imports from online retailers increased from around R19 million in January, 2022 to R120m in December, 2023 a significant 539% increase over the two- year period, according to XA Global Trade Advisors.
Sars said in a statement last week it had noted legitimate concerns expressed in the importation of several goods, especially clothing, via e-commerce by a number of importers who had not been paying the obligatory customs duties and VAT on these imports, resulting in unfair competition with other industry players.
The concerns stemmed from the fact that, due to the immense scale of trade via e-commerce, Sars Customs implemented a “concession” for goods valued at less than R500 in terms of which importers paid a flat rate of 20% in lieu of customs duties, and no VAT.
Batches of parcels brought into the country from Chinese retailers that are below R500 would be taxed from September 1.
“To address these concerns and provide clarity for traders involved in the importation of goods via e-commerce, Sars will make several changes in line with the World Customs Organisation (WCO) framework to deal with the already changing trade landscape,” it said.
These guidelines aimed to assist WCO member customs administrations in standardising the processing of e-commerce goods, based on the principle of information being provided by the operator to Customs and Excise in advance of the arrival of the goods, and the universal categorisation of goods into four categories.
∎ Category 1: Correspondence and documents: No commercial value, not subjected to duties and taxes.
∎ Category 2: Low-value consignments for which no duties and taxes are collected.
∎ Category 3: Low-value dutiable consignments (simplified goods declaration) – goods above de minimis, but below full declaration value threshold, dutiable, and the use of a simplified declaration or release against a manifest with subsequent simplified clearance etc.
∎ Category 4: High-value consignments. Normal release and clearance procedures, including payment of duties, and taxes apply.
Other changes that Sars said it would implement was the reconfiguration of the current 20% flat rate into the WCO regime for the first three broadband categories with appropriate duty rates by November 1, 2024.
Dudley Filippa, chairperson of Saiea, said: “We welcome the announcement, albeit there has been much confusion and trepidation on this matter.
“There is a need for ongoing Sars/stakeholder consultation so as to facilitate meaningful collaboration before finality can be reached. Decisions not exhaustively deliberated could negatively impact thousands of jobs, independent couriers, SMEs, and logistics companies,” she said.
Donald MacKay, the founder and CEO of XA Global Trade Advisors, said “The VAT on top of the 20% makes perfect sense. The systems can already collect import VAT, it would be fairly trivial to extend this to the goods imported by courier. Companies registered for VAT will be able to claim this back, and those who are not will have to pay the (customs) cost, the same way we all do when we buy stuff in a normal shop. It seems reasonable to have this provision in place by September 1, 2024.”
He said in phase 2, Category 1 (correspondence and documents of no commercial value) and Category 2 (low-value items which still collect no duty) are still straightforward, but Category 3 was not so much. Here we still have an expedited clearance process, but now the goods in each parcel would need to be separately identified and classified.
“If you are importing a tracksuit, the duties will be 45%, but if you import shoes, the duties are 30%. Now throw in a glass bowl (20%) and you can quickly see that this is a lot more work than a flat 20% (rate). If the tracksuit doesn’t fit, how do you get your duties and VAT back? No idea… And I suspect Sars doesn’t either,” he said.
He said, “Adding complexity to the clearing process will increase the cost to couriers. They can either increase their price or have lower margins.The flat rate could be increased. This would maintain the simplicity, but would raise the overall tax collected. If most of what is being imported is clothing, then this could be quite high, but if clothing is only a small portion of imports then quite a lot of people will be paying more duty than they should. This has the potential to breach the World Trade Organisation (WTO) bound rate rule.”
BUSINESS REPORT