Temu and Shein are Set to Face New Shipment Tax Regulations

Picture courtesy: (Tsakisi Muhlari) SARS ensures that smaller parcels imported into South Africa apply the same duty VAT of 45% as larger order shipments.

(The Post News)- Stakeholders in local retail industries have welcomed the involvement of the Department of Trade, Industry & Competition which will investigate the international e-commerce retailers taxed for small packages at the same rates as fees taxed on large orders.

Starting from the first week of July, parcels will now be subject to 45% duty plus VAT for larger order shipments.

Revenue Services has discovered that some online international companies may be bypassing regulations by exporting small parcels to South Africa valued at less than R500, thereby avoiding VAT charges and only being subject to a 20% import duty.

“This move aims to create a fairer market for local retailers following criticism that companies like Temu and Shein have been using tax loopholes to gain an unfair advantage in the local market by breaking up large shipments into small packages,” Siphiti Sibeko, the spokesperson for SARS.

According to the South African Revenue Services (SARS), all clothing imported into South Africa is subject to an import duty of 45% plus 15% value added tax (VAT).

Rael Levitt, the CEO of Inospace said, “We fully support free market dynamics, especially when entrepreneurs benefit from them.”

He added that logistics have a strong focus on last-mile fulfilment. “It is important that local businesses are given a fair chance to compete and these new regulations are necessary to ensure that South African companies operate on a level playing field.”

“We are working together with SARS and customs to ensure that we operate on a level playing field,” said the CEO of TFG, which owns brands like Foschini and Bash, Anthony Thunstrom.

“Over the past few months, there has been better enforcement from SARS and customs,” he added.

The executive director of the National Clothing Retail Federation (NCRF), Michael Lawrance, said he was very pleased with the news and that was what they longed for.

For a while, the South African Clothing and Textile Workers Union (Sactwu) and NCRF have been suggesting that the South African Revenue Services (SARS) act against online platforms such as Temu and Shein.

SARS says that courier companies overseas using online merchants to import and deliver imported clothing need to follow the law in their declarations with SARS, noting that there have been leanings to under declare items coming into the country.

“It appears that some companies have been incorrectly using 20% code for small packages and we don’t know how this came about because it’s not in line with existing regulations. The law always remains 45%, and it will remain so. We made it clear to the courier companies to use the right code of 45% and we expect them to adhere to the law when they deal with SARS,” says Sibeko.

Local businesses argue that the lack of accountability from online overseas merchants creates an unfair advantage, causing local producers to lose business despite conforming to the Customer Protection Act.

“It has come to our attention that certain companies took advantage of the systems way within SARS, where small packages come in at under 20% duty and VAT payments, resulting to a big problem, and that’s not fair to the market field.”

We will respond differently to other commercial implications, market implications but we need our regulatory environment to be fair, transportable, and free to a certain level,” said Lawrance.

The National Clothing Retail Federation said that the practices show that SARS has lost millions of rands as full taxes due to historically not being paid.

The NCFR has proposed to assist SARS with the use of Artificial Intelligence (AI) to determine the value of parcels so that they are properly taxed.

“We have collaborated with SARS to provide any necessary artificial intelligent (AI), to prevent clearance of suspicious packages and they won’t be released without proper inspection. The risk engine mechanism is the way we can possibly assist by either bringing in technical experts into assisting with software applications, and we are delighted with those.” Lawrence added.

The NCRF emphasised that cargo cleaners must take responsibility for the quality of products imported into the country, especially since companies like Shein and Temu have no local presence. The Consumer Protection Act grants consumers the right of recourse in this country, which these importers seemingly do not offer.