SARS aware online clothing stores have been skirting import tax rules

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The South African Revenue Service (SARS) says that all imported clothing that comes into South Africa should have an import duty of 45% plus 15% value added tax (VAT).

The Revenue Services says, however, it has been made aware that some online offshore companies may have been by passing this rule when exporting small parcels to South Africa deemed to be less than R500 in value and only being charged an import duty of 20% and zero VAT.

The National Clothing Retail Federation says these tendencies have served to undermine local clothing producers, giving these offshore online merchants an unfair advantage in the local market.

SARS says courier companies that deliver imported clothing from overseas online merchants need to properly observe the law in its declarations with SARS, noting that there have been tendencies to under-declare items coming into the country.

“The companies have been using a wrong code for small packages, 20 % – we don’t know how that happened because that’s not in line with the law. The law has always been the 45%. Be that as it may, we have now spoken to the courier companies to use the right code in that declaration the right percentage which is 45% . We expect them to adhere to the law in that declaration when they deal with SARS,” says Siphiti Sibeko, spokesperson for SARS.

Local clothing manufacturers says these practices have given online overseas merchants an unfair advantage, taking away business from local producers who conform with the demand of the Consumer Protection Act and who are not able to cut costs in the way that these competitors have been able to.

“But what we know is that they took advantage of a very peculiar system within SARS where small parcels would come in at under 20% duty and VAT collectively and that certainly caused us a big problem – that’s not a level playing field. We’ll respond to some of the other more commercial implications differently; market disruption implications differently but we need our regulatory environment to be fair, free and transparent and level,” says Michael Lawrence, Executive Director of NCRF.

The National Clothing Retail Federation says these practices imply that SARS has lost out on millions of rand as full taxes due have historically not been paid.

They’ve even proposed to assist SARS with the use of Artificial Intelligence technology to better determine the value of parcels, so that they’re properly taxed.

“We’ve also offered to assist them with any AI that is necessarily – you can’t open every parcel – AI risk engine mechanism is their ways we can possibility assist by either bringing in tech experts into or assisting with, software applications; we’re very happy with those,” Lawrence added.

The NCRF says that the freight forwarders and/or cargo clearers must take responsibility for the quality of products imported into the country as there’s no presence of companies like Shein and Temu in the country, arguing that the Consumer Protection Act gives the South African consumer the right of recourse, which these importers seemingly don’t.