SARS: Delayed date for implementing increased taxes on international clothing imports

SARS: Delayed date for implementing increased taxes on international clothing imports

• 12 August 2024
• SARS Issues
• South African Accounting Academy

The decision was made after concerns were raised about major Chinese online retailers (e.g. Shein and Temu) exploiting a tax loophole.

Local retailers must pay 45% plus VAT for imported clothes, while Shein and Temu were accused of avoiding duties and VAT.

The South African International eCommerce Association (SAIEA) said that SARS has sent correspondence to the Freight Forwarding industry in South Africa, stating that further engagement with stakeholders regarding the change is needed. SARS needs to ensure trade system readiness across the sector before implementing the hike, and have indicated that they will be consulting with stakeholders before implementing the tariff hike.

The decision to apply the tariff was made due to concerns about financial losses and uncollected taxes.

Consumers have expressed frustration over the announcement to discontinue the small parcel exemption.

SARS has indicated that it has not yet set a date for imposing the 45% tariffs, plus VAT.

SARS will make several changes in line with the World Customs Organization (WCO) framework to deal with the already changing trade landscape, and at this stage the changes to be implemented are:

• 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.

Click here to access the SARS Media Release:

https://www.sars.gov.za/media-release/changes-to-customs-import-system/

Relevance to Auditors, Independent Reviewers & Accountants:

• The Income Tax, VAT and Customs & Excise Acts are pieces of legislation that your clients must comply with, and which you must assess compliance with.  If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
• As an auditor, independent reviewer and accountant, you need to consider INFO.
• Tax practitioners play a critical role in bridging the gap between taxpayers and SARS. As legislation, regulations and tax law are continuously changing and evolving, it is of utmost importance for companies and tax practitioners to keep abreast of such changes in so that companies continue to meet their tax obligations.
• As a taxpayer, you also need to comply with relevant conditions when buying clothing items from international online retailers.

Relevance to Your Clients:

• Taxpayers have a duty to comply with the Income Tax, VAT and Customs & Excise Acts, otherwise they could face fines and penalties.
• As legislation, regulations and tax law are continuously changing and evolving, it is of utmost importance for companies to continue to meet their tax obligations.
• As a taxpayer, your clients also need to comply with relevant conditions when buying clothing items from international online retailers.

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