Starting on September 1, 2024, the South African Revenue Service (SARS) will enforce interim tax changes that will significantly impact e-commerce platforms like Shein and Temu.
This decision comes as part of an effort to level the playing field for local clothing retailers, who have been adversely affected by the lower pricing strategies of these international companies.
Currently, these importers pay a flat 20% duty, which will now also include Value-Added Tax (VAT).
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SARS stated that these measures are necessary to promote fair competition and to mitigate concerns about e-commerce imports, primarily clothing items.
These imports have often bypassed the obligatory customs duties and VAT, resulting in unfair competition for local retailers.
SARS highlighted that this situation arose partly because of a special customs concession for packages valued under R500, allowing a flat rate of 20% instead of full customs duties and tax.
Aligning with the World Customs Organization (WCO) framework, SARS is making several changes. The WCO guidelines categorize e-commerce goods into four categories, from correspondence and documents to high-value consignments.
From 1 November, the existing 20% flat rate will be reconfigured into this WCO regime, providing a more standardized approach to processing e-commerce goods.
SARS Commissioner Edward Kieswetter has emphasized the need for modernizing tax rules and administrative processes to keep up with the rapid growth of online shopping.
The organization plans to utilize data, artificial intelligence, machine learning, and algorithms to better facilitate trade while minimizing economic risks.
Addressing a critical gap, Kieswetter revealed that fiscal losses due to tax loopholes exploited by international e-commerce players amounted to approximately R3.5 billion.
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