Bad news for people who shop on Temu and Shein in South Africa

The South African Revenue Services (Sars) believes new e-commerce regulations for international players like Temu and Shein could bring in an additional R3 billion in VAT, City Press reports.

National Treasury’s Budget review document for 2025/26 noted plans to review VAT exceptions for imported low-value goods since March.

Chapter 4 of the document, which was titled “Other matters under consideration and consultation,” explained that government would re-examine the exemption contained in the VAT Act of 1991.

“Government will review legislation to bring parity to the VAT treatment of such goods purchased online, as many offshore suppliers of these goods are not registered for VAT,” Godongwana said.

While it did not specifically name any companies, the import tax practices of Chinese e-commerce retailers Temu and Shein have been in the spotlight since early 2024.

Many local online retailers and representatives of goods manufacturers in South Africa called attention to tax loopholes being exploited by foreign importers, allowing them to undercut domestic players.

Industry sources explained that the problem was a Sars concession from 2007, which allowed importers to pay a flat duty rate of 20% without VAT on low-value imports below R500.

That concession aimed to simplify customs clearance processes for logistics companies as international e-commerce activity accelerated.

However, local retailers said the concession was being exploited to avoid the 45% duty on imported clothes, creating an unfair playing field in the clothing and textile sector.

In 2024, Sars estimated that these loopholes resulted in tax losses of close to R3.5 billion, given the rise in global e-commerce trade.

Insaka eCommerce Academy founder Warrick Kernes told the City Press that ensuring VAT is charged on low-value imports is essential to level the playing field for local e-commerce platforms.

Kernes noted that these new tax regulations would make purchasing goods from retailers more expensive for consumers, which he says will make them think twice before making international purchases.

“South African retailers can compete better by adding value to their commerce offerings, such as faster deliveries,” he said.

Sars responds

Sars initially responded to complaints from the local industry by announcing it would start levying the entire 45% clothing tax on all applicable imports, including those valued under R500, from 1 July 2024.

However, that plan was put on indefinite hold. Instead, the taxman said it implemented an interim measure from 1 September 2024 and began levying 15% VAT on top of the 20% duty on low-value orders.

From 1 November 2024, Sars said it would reconfigure the 20% flat duty to align with the World Customs Organisation (WCO) import guidelines.

However, these new rules were not implemented until February this year, as additional time was needed to ensure they balanced the interests of various industry stakeholders.

This was according to South African Express Parcel Association chair Garry Marshall, who maintained that nothing the Chinese retailers or their logistics partners did at customs was illegal.

He said the main issue with the mechanism was its impact on South Africa’s clothing and textile industry.

Marshall added that scrapping the concession to eliminate the 20% flat duty loophole could have had disastrous consequences for import procedures.

This was because its primary purpose was not to reduce consumer costs but to speed up deliveries.

“The vast majority of courier traffic coming in is cleared through customs before it even arrives in the country,” Marshall said.

“If you were going to submit the documents with all the tariff codes to customs, it could take days to clear a shipment.”

Sars has yet to communicate its de minimis and full declaration value threshold to the general public, making it difficult for consumers to estimate how much they will pay for an imported item.