Temu and Shein tax chaos in South Africa

The South African Revenue Service (Sars) still plans to start implementing tax changes that could significantly increase the prices of imported goods from Chinese retailers Shein and Temu.

However, figuring out how these taxes will be calculated remains a bit of a mystery, as Sars has yet to publicly pronounce what its de minimis amount is for duty-free imports, if indeed it will have one.

It is also yet to clarify a full declaration value threshold beyond which regular duties will apply depending on the type of product being imported.

In addition, multiple Temu and Shein orders have reported widely differing import taxes being levied on their orders.

Many people and e-commerce analysts once believed that the e-commerce giants were able to pay low taxes on their shipments to South Africa by splitting products in the same order into smaller parcels.

With the value of each parcel below a de minimis amount, they would be completely exempt from taxes.

However, South Africa had never adopted the de minimis rule that applies in countries which implemented the World Customs Organisation’s (WCO’s) guidelines for e-commerce orders.

The actual mechanism that the retailers’s logistics partner used was a concession from 2007 that allowed for a 20% flat duty with no VAT on all parcels with a value under R500.

This still proved highly problematic — particularly when it came to clothing imports.

South African clothing retailers must pay a 45% import duty on clothes in addition to 15% VAT, resulting in an effective tax rate of more than 60%.

These high taxes are implemented to protect the local textile industry, which is estimated to facilitate about 60,000 to 80,000 jobs in the country.

Sars responded to complaints from stakeholders in the textile and local e-commerce industry by announcing it would start implementing the full 45% tax on all orders containing clothing from Temu and Shein starting in July 2024.

However, this did not happen as planned and the taxman announced a more gradual transition to a new import tax regime for small parcels in early August 2024.

Sars explained would first start levying 15% VAT in addition to the current 20% flat duty on small orders with a value under R500 as an interim measure.

The bigger plan was to reconfigure this flat rate into the WCO guidelines by November 2024.

These guidelines standardise the processing of e-commerce goods, based on the principle of information being provided by the operator to customs in advance of the arrival of the goods.

Operators are required to classify goods under one of four distinct categories:

• Category 1: Correspondence and documents — No commercial value, not subjected to duties and taxes, immediate release on the basis of a consolidated declaration that may be oral or written (a manifest, a waybill or an inventory of such items).
• Category 2: Low-value consignments below a specified de minimis threshold — No duties and taxes are collected, and immediate clearance and release are done against a manifest, a waybill, a house waybill, a cargo declaration, or an inventory of items.
• 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.
• Category 4: High-value consignments (full goods declaration) — Consignments not falling under the three categories described above and includes consignments containing goods that are subject to restrictions. Normal release and clearance procedures, including payment of duties and taxes, apply.

Several Temu shoppers have reported highly varying taxes on orders over the past month.

In many cases, these taxes don’t seem to correspond with Sars’s 20% flat duty plus 15% VAT.

The table below shows an example of two sub-R500 orders from Temu placed by a MyBroadband reader in October 2024.

Sars keeping consumers in the dark

In addition to the greatly varying taxes currently charged, Sars has yet to announce its de minimis or full declaration value thresholds under the WCO guidelines.

These will be needed to determine into which of the three latter categories an order falls.

MyBroadband asked Sars for clarity on the actual taxes levied on orders and whether it had already implemented the WCO’s guidelines.

Sars’s media team referred MyBroadband back to its communication from early September and said that this remained its stance.

If Sars has set the country’s de minimis value at R500, Temu and Shein orders below that value would be completely exempt from customs duties, based on the WCO’s guidelines.

However, some countries still slap VAT on these orders. Even so, the effective tax rate on small packages would then be 15% instead of the previous 20% flat duty.

Sars will need to clear up these factors so that consumers shopping on these platforms will have a clearer indication of how much tax they can expect to pay on an order from Shein or Temu.

Unlike Amazon.com, neither retailer gives users an estimate of how much tax they can expect to pay.

The US retailer includes VAT and import duties in its order price and will not only cough up the difference if it underestimates the taxes but will pay customers back if it overcharges.