Temu and Shein tax crackdown in South Africa

Uncertainty surrounds the taxes on international e-commerce imports to South Africa, as the country’s taxman has kept quiet on important changes in its customs import system implemented late last year.

In the past few months, several reports have claimed that the South African Revenue Service (Sars) is clamping down on Shein and Temu’s alleged dubious tax practices.

In early 2024, disgruntled local retailers alleged that the Chinese retailers were getting their goods into the country on the cheap by splitting items into separate consignments.

That was supposedly done to ensure the individual smaller consignments fell below a de minimis value, exempting them from import taxes.

However, South Africa’s de minimis was set at R0 at the time, meaning no imported items were exempted from taxes.

A source with close knowledge of Shein and Temu’s practices told MyBoadband that the mechanism they used to keep their import taxes low was a special Sars concession for imports below R500.

First implemented in 2007, the concession allowed logistics companies to pay a flat duty rate of 20% with no VAT on these items.

The measure was necessary to speed up customs clearance processes as e-commerce activity started picking up pace in South Africa.

The complaints from local retailers and the textile industry, particularly regarding clothing products, led to Sars announcing it would start levying the full 45% tax on clothing items under R500 from 1 July 2024.

However, it subsequently put this plan on hold “until further notice”.

As an interim measure to address local industry’s concerns, it started levying 15% VAT in addition to the 20% flat duty on all imports with values under R500 from 1 September 2024.

Sars also said it would reconfigure the current 20% flat rate for low-value orders into the World Customs Organisation (WCO) Framework for the processing of border-crossing e-commerce goods, effective 1 November 2024.

The WCO’s release and clearance procedures were developed in the early 1990s to address the large numbers of small or negligible-value goods carried between countries by courier and express mail services.

The WCO guidelines set out the following four broadband categories for imported goods:

• Category 1: Correspondence and documents with no commercial value – Not subjected to duties and taxes, immediate release on the basis of a consolidated declaration that may be oral or written.
• 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 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, etc.
• Category 4: High-value consignments – 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.

It is up to each country’s tax authority to decide what their de minimis value should be.

For example, in Australia, the amount is AU$1,000 (R11,673), in Europe, it is €150 (R2,908), and in the UK, the de minimis is £135 (R3,158).

Countries can also decide whether these low-value orders should still be subject to VAT.

Sars keeping quiet on key details

However, South Africa’s taxman has not yet published its specified de minimis and full declaration values.

These amounts are necessary to know under which broadband category an import must be classified and determine how much import tax is payable on that import.

As it stands, online shoppers cannot estimate roughly how much tax they will pay on an order from an international retailer like Shein or Temu, which only send tax details after an order is placed.

MyBroadband has asked Sars for clarification on the de minimis and full declaration amounts on at least three occasions, but the agency has not responded to our queries.

While several media outlets have continuously claimed that all orders of clothing are now subject to the same 45% duty that large importers have to pay, this is not the case.

MyBroadband assembled several orders from Shein and Temu customers since 1 November 2024 and found that the taxes on these consignments varied greatly.

One order’s effective tax rate was lower than the 15% VAT that is supposedly applied to all imports, regardless of value.

The table below summarises the tax details for several Shein and Temu orders made after 1 November 2024.