Tax Changes for Low-Value Parcel Imports in South Africa

By Nqobile Dludla

JOHANNESBURG (Reuters) – Importers of low-value parcels destined for South Africa will soon pay value added tax (VAT), according to the country’s tax authority. This interim measure aims to protect the local clothing industry from fierce competition posed by international e-commerce players like Shein.

This decision follows similar actions by other regions, including the European Union, which is considering abolishing its duty-free limits as part of customs reform.

The South African Revenue Service (SARS) acknowledged concerns regarding the importation of various goods, particularly clothing, via e-commerce, where many importers have neglected to pay the necessary customs duties and VAT. This scenario has led to “unfair competition”.

Previously, SARS allowed a concession for goods valued under 500 rand ($27.25), applying a flat rate of 20% instead of standard customs duties, and exempted them from the 15% VAT.

To level the playing field and clarify regulations for e-commerce importers, SARS will introduce VAT alongside the existing 20% flat rate on low-value parcels starting September 1. Additionally, by November 1, the flat rate will be reconfigured to align with the World Customs Organisation’s regime, incorporating appropriate duty rates.

Both brick-and-mortar and online fashion retailers have requested South African regulators to implement a 45% import duty on all clothing imports, regardless of value, to ensure fair competition.

China-founded Shein, which intends to go public in Britain, credits its growth to its flexible supply chain and on-demand business model.

($1 = 18.3491 rand)

Summary

South Africa will implement VAT on low-value imports from September 1, addressing concerns over unfair competition with international e-commerce retailers like Shein.