Warning to Temu and Shein in South Africa

The South African government plans to review a VAT exemption on certain low-value goods imported from overseas, targeting the e-commerce industry in particular.

This was revealed in the National Treasury’s Budget Review document for the 2025/2026 financial year, published alongside finance minister Enoch Godongwana’s budget speech on 12 March 2025.

Chapter 4 of the document, which is titled “Other matters under consideration and consultation,” explains that government will relook VAT exemption contained in the VAT Act of 1991.

“Government will review legislation to bring parity to the VAT treatment of such goods purchased online, as many offshore suppliers of these goods are not registered for VAT,” Godongwana said.

While it did not specifically name any companies, the import tax practices of Chinese e-commerce retailers Temu and Shein have been in the spotlight since early 2024.

Many local online retailers and representatives of popular goods manufactured in South Africa that are also sold by the Chinese stores — including clothing — cried foul over Temu and Shein’s cheap prices.

Some industry stakeholders accused the retailers of dodging import taxes by splitting up packages into lower-value consignments and reassembling them after import to abuse South Africa’s de minimis rule.

It soon emerged that South Africa does not have a de minimis, but there was an old concession on the taxman’s books they were likely exploiting.

Industry sources alleged the problem was a South African Revenue Service (Sars) concession from 2007, which allowed them to pay a flat duty rate of 20% without VAT on low-value imports below R500.

That concession aimed to simplify customs clearance processes for logistics companies as international e-commerce activity started accelerating.

However, local retailers regarded this as highly unfair, considering they must pay a 45% duty on clothing bought into the country by major retailers.

This high duty aims to protect the local textile industry, which has been bleeding for many years due to imports from Asian countries, where labour and materials are much cheaper.

Taxman’s confusing response

Sars responded by announcing it would start levying the entire 45% clothing tax on all applicable imports, including those valued under R500, from 1 July 2024.

That plan was put on indefinite hold and instead, the taxman implemented an interim measure in which it said it would levy 15% VAT on top of the 20% duty on all low-value orders.

That measure was supposedly put in place from 1 September 2024.

From 1 November 2024, Sars said it would reconfigure the 20% flat duty to align with the World Customs Organisation (WCO) guidelines on imports.

However, there is still great uncertainty around the revised taxes as Sars must still announce two key amounts in the WCO guidelines — the de minimis and minimum declared value.

These are necessary to determine in which broadband categories imported goods will fall as part of the WCO guidelines. The broadband categories are as follows:

• 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.

MyBroadband has analysed the effective taxes on numerous Temu and Shein orders placed after 1 September and 1 November and found that the effective tax rate was below 15% on some orders.

That implies that certain Temu and Shein imports are still being cleared through customs without incurring VAT.