Beware customs with Internet purchases

Online shopping is a practical, convenient and maybe even fun way to buy your goods, but when buying from international companies it can be a lot more expensive than you expect.

Many people have experienced the excitement of finding a product cheaper online from a US company, for example, than from a local retailer. At times, the product in question is not available locally at all, but the total amount that is ultimately spent on it turns out to be significantly more than what is advertised online. This is due to paying an arm and a leg in custom duties and taxes to retrieve it from the Post Office.

Burrows’ case

Debt collection practitioner, Cheryl Burrows contacted Moneyweb after she decided not to collect her package from the Post Office because of the additional fees she would have had to pay. She had purchased two bottles of health supplements which, at the time, amounted to R1 072.50 each at the prevailing rand/dollar exchange rate. A total of R2 145 was therefore deducted from her credit card by the US-based company.

After waiting five months, she received a notice from the Post Office informing that her package had arrived and that she would have to pay R1 291.06 to collect it. That is more than half the amount she had already paid for the goods. So she opted to leave her package at the Post Office, accepting her loss of R2 145 as money down the drain, and writing to Moneyweb in frustration.

“Will South Africans be able to afford buying anything from overseas due to the South African Customs Rip Off? What a shame,” she wrote.

South African Revenue Service (Sars) response

Deputy spokesperson of Sars Marika Muller, said Burrows had been charged correctly, giving the following explanation:

The parcel was valued at US$300 and this was converted at an exchange rate of R11.10 to the USD, which gives a rand value of R3 330.

Supplements are subjected to

1. 20% customs duty – 20% of R3 330 is R666; and

2. 14% VAT – but that is not 14% of R3 330 but of a value known as added-tax value (ATV) which is arrived at as follows: Customs value + 10% thereof + the customs duty amount of R666. This equates to R4329 and 14% thereof is R606.06

And this is how the total fee of R1 206.06 was calculated. What is not explained, however, is how the value of US$300 was attributed to the parcel.

“It is also important to note that some of these costs (duty) are calculated based on the value of the product in South Africa, and not what might have originally been paid for the item overseas,” says Muller.

According to the Sars website, the ATV includes a 10% markup on the customs value for goods purchased outside of the BLNS (Botswana, Lesotho, Namibia or Swaziland) countries.

Gifts over R400 not exempt

These duty fees and taxes are also applicable to gifts valued higher than R400. That means you won’t be able to receive packages sent from friends and family abroad if their value exceeds this threshold – unless you pay.

And, given the rand’s relative weakness, even the most modest of gifts will cost you. That is, at current exchange rates, any package valued at US$37, £23 or €29, will be subject to custom charges, which include a duty (the percentage charge of which depends on what is in the parcel) and VAT (charged at an added tax value, and not at a straight 14%).

For gifts that are valued at less than R400, South Africans are exempt from Customs fees; unless they are wines, spirits, tobacco (including cigarettes and cigars) or perfume. In which cases you still have to pay to aforementioned fees.

Sars was asked to give further comment on the lack of transparency in calculating these charges; what mechanisms were available to consumers who wanted to calculate the full cost of their online purchases; and its apparent lack of communication to consumers of the implications of online purchases, but had not responded at the time of writing.

Source: Moneyweb

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Beware customs with Internet purchases