Sars intends to introduce taxes against Shein and Temu

South African The Tax Office has announced new tax measures against importers of cheap clothing in online trade.

Late Thursday, the tax office said it had “noted legitimate concerns” about garment imports via e-commerce platforms. It said “several importers” — it did not name them — were not paying “mandatory” customs duties and VAT on those imports, “leading to unfair competition with others in the industry.”

Sars said the concerns stemmed from the fact that, due to the “huge scale” of e-commerce trade, customs had introduced a “concession” for goods valued at less than R500, whereby importers paid a flat 20% rate in lieu of duty and VAT. Some importers, including China’s Shein and Temu, had been taking advantage of this dispensation to import low-value goods and allegedly avoid import taxes paid by other South African clothing retailers.

“To address these concerns and provide clarity for traders importing goods via e-commerce, Sars will be introducing a series of changes aligned with the World Customs Organisation (WCO) framework to cope with an already changing trade landscape,” a tax official said.

As explained, in the early 1990s, the World Customs Organization developed a set of release and clearance procedures known as the “World Customs Organization Guidelines for Prompt Release.”

“The purpose of these guidelines is to assist customs administrations of WCO Member States in standardising the processing of e-commerce goods, based on the principle of pre-arrival information provided by the operator to customs and on a universal categorisation of goods into four distinct categories.”

From 1 September, Sars will introduce VAT on these goods, on top of the current flat rate of 20%, as an “immediate temporary measure” to protect South African businesses.

“Appropriate rates”

It will then reconfigure the 20% flat rate from 1 November in line with the WCO system, with “appropriate rates”, it said, without giving details. This reconfiguration will take place for three of the four WCO guideline categories, which are:

• Category 1: Correspondence and documents – having no commercial value, not subject to customs duties and taxes, immediate release on the basis of a consolidated declaration, which may be oral or written (manifest, bill of lading or list of such items).
• Category 2: Low value shipments below a certain value minimum a threshold from which no duties or taxes are levied, and immediate clearance and release on the basis of a manifest, waybill, freight forwarder’s waybill, cargo declaration or item list.
• Category 3: Low Value Dutiable Shipments (Simplified Goods Declaration) – Goods above minimumbut below the full declaration value threshold, are subject to customs duty and application of a simplified declaration or exemption on the basis of a manifest with subsequent simplified clearance, and so on.
• Category 4: This applies to high value shipments that require a full declaration of goods. These are shipments that do not fall into the three categories described above and include shipments containing restricted goods. Normal release and clearance procedures apply, including payment of duties and taxes.

Read: Shein and Temu threaten South African jobs, claims Takealot

Sars Commissioner Edward Kieswetter said the tax office would work with the Department of Trade, Industry and Competition and other industry stakeholders to “build public confidence by seeking to level the playing field to protect local industry and create business opportunities that support economic growth.”

SARS will “make greater use of data, artificial intelligence, machine learning and algorithms to facilitate trade while minimizing risks to the economy,” Kieswetter said. © 2024 NewsCentral Media

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