SARS to Reform e-Commerce Customs and VAT to Protect Local Industries

The South African Revenue Service (SARS) remains committed to providing clarity and certainty in the implementation of its mandate of promoting legitimate trade for the economic development of the country in an era of rapidly expanding e-Commerce. This will be achieved by making it simple and easy to facilitate an increased movement of goods.

Pursuant to the above mandate, SARS noted legitimate concerns that have been expressed in the importation of several of goods, especially clothing, via e-Commerce by a number of importers who have not been paying the obligatory Customs duties and VAT on these imports, resulting in unfair competition with other industry players.

The concerns stem from the fact that, due to the immense scale of trade via e-Commerce, SARS Customs implemented a “concession” for goods valued at less than R500, in terms of which importers paid a flat rate of 20% in lieu of Customs duties and no VAT.

To address these concerns and to provide clarity for traders involved in the importation of goods via e-Commerce, SARS will make several changes in line with the World Customs Organization (WCO) framework to deal with the already changing trade landscape.

In early 1990 the shipment of large numbers of small or negligible value goods across borders being carried by courier and express mail services was already experiencing significant growth globally and resulted in the World Customs Organisation (WCO) developing a set of release/clearance procedures – known as the “WCO Guidelines on Immediate Release”.

These guidelines aimed to assist WCO member Customs administrations in standardising the processing of eCommerce goods, based on the principle of information being provided by the operator to Customs in advance of the arrival of the goods, and the universal categorization of goods in four (4) 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 for which no duties and taxes are collected, and immediate clearance and release 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, etc.

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.

The changes to be implemented:

• The introduction of VAT in addition to the current 20% flat rate Customs duty by 1 September 2024 as an immediate interim measure.
• The reconfiguration of the current 20% flat rate into the WCO regime for the first 3 broadband categories with appropriate duty rates, by 1 November 2024.

SARS Commissioner Edward Kieswetter said SARS will partner with the Department of Trade, Industry and Competition (DTIC), as the custodian of the country’s trade policy and development, as well as other industry players, to build public trust by seeking opportunities to level the playing field to protect local industries and create business opportunities for economic growth. He said that SARS will resort to the greater use of data, artificial intelligence, machine learning and algorithms to better facilitate trade while minimising risks to the economy.