Online shopping in South Africa has just become more expensive. SARS has introduced new tax regulations for imports from foreign online platforms, aiming to protect local industries and generate revenue. These changes affect consumers and retailers alike, with revised customs duties, import VAT and de minimus rule changes.
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Taxes up from November
Since November, consumers have been grappling with uncertainty due to recent changes in online shopping taxes. Two regular online shoppers shared their startling experiences.
Wendy Dondolo, a third-year student at Cape Peninsula University of Cape Town, recently incurred a surprising tax and customs fee on her R300 clothing purchase from Shein: “I ordered for R1,300 then my customs were R500 … that’s almost 50%.”
Dondolo’s previous strategy was splitting orders to minimise customs fees, but she now doubts its effectiveness. “Normally the strategy was to split your order into two orders to pay less customs but now I don’t think the strategy will work because you are still going to pay more customs even if you split your order,” she told Daily Maverick.
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Similarly, Nwabisa Gocini, who has been helping her neighbours with online shopping free of charge, has experienced significant challenges recently.
“Yoh! Customs are now expensive, I recently ordered for another lady for a few items amounting to R1,2oo but she was taxed R400. I ordered for someone else for R958 and her tax was over R200. The tax is so high and purchased items arrive very late,” she said.
Customs duties
This surge in customs fees is no isolated incident. In fact, it’s a direct result of South Africa’s revised taxation process for imports from foreign online platforms.
The taxation process for imports from foreign online platforms involves several key stages, starting with customs duties, which are taxes imposed on imported goods to protect local industries and generate revenue for the government. These duties are calculated based on their type, value and origin.
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Chetan Vanmali, partner in tax: indirect (VAT and customs) at Webber Wentzel, says product categories, such as clothing, jewellery, home goods and sports equipment are classified under distinct customs tariff codes, each falling within specific chapters. As a result, each category may incur varying amounts of duty payable to SARS.
How goods will be taxed
The base for calculating customs duties depends on the customs value of the goods, which is determined according to the World Trade Organization (WTO) Valuation Agreement.
The customs value is typically the transaction value, price paid or payable and may include costs such as freight, insurance, commissions and packaging. The South African Harmonised Customs Tariff determines the customs tariff code (HS code) for imported goods, defining the rate of duty.
The rate of duty is determined based on the tariff classification and can be ad valorem (a percentage of the customs value) or there can be specific duties (a fixed amount per unit, for example per kilogram or litre).
Raesah Shaik, associate in tax at Webber Wentzel says, for example, clothing items will attract a 40% duty rate. If the purchase price is R1,000, you would pay customs duties of R400.
But wait, there’s more. You would also have to pay import VAT, which works out to R225 for a purchase order of R1,000. So, the total cost would be R1,625.
What changed
Previously, imports under R500 were subject to a 20% customs duty, but exempt from VAT. However, SARS realised that online global retailers were exploiting this exemption. They were also able to undercut local retailers who pay up to 45% customs duty on imports and 15% import VAT.
At the beginning of this month, the de minimis rule was revised so the 20% customs duty will no longer apply. Instead, in line with World Trade Organization (WTO) regulations, applicable import VAT will apply. Beyond import VAT, foreign online retailers that register for VAT would have to charge an additional 15% sales VAT. DM