The Trade, Industry, and Competition Ministry has announced that, as of July 2024, clothing items bought from international e-commerce retailers such as SHEIN and Temu, and packaged in small quantities, will be taxed at the same rate as large quantities.
This measure is expected to level the playing field between international e-commerce giants and local businesses with the aim of curbing tax loopholes exploited by international platforms.
“We are fully supportive of free market dynamics, especially when they benefit entrepreneurs. It is crucial that local businesses are given a fair chance to compete. These new regulations are a necessary step to ensure that South African companies can operate on a level playing field,” comments Rael Levitt, CEO of Inospace.
The company manages 50 micro-logistics parks across South Africa. With 70% of its 1 500 clients involved in e-commerce, it has been proactive in developing a range of facilities to support this growing industry including pick-and-pack fulfilment services, flexible warehousing, and a range of logistics facilities. Additionally, Inospace provides technology that offers competitive and optimal courier rates.
Outgoing Minister of Trade, Industry, and Competition, Ebrahim Patel, emphasises the importance of equality of treatment in the marketplace. “Everyone must pay the full customs duties and the full VAT. This ensures that South Africa is not left poorer because of any gaps in our regulatory environment.”
Several local retailers have welcomed the move, noting that international platforms such as Temu and Shein have been using tax loopholes by bringing in products in small quantities to avoid higher import duties. South Africa imposes a 45% import duty plus VAT on imported clothing packages worth over R500, but parcels below this amount were previously subject to minimal duty. From the 1st of July 2024, these parcels will now attract the same 45% duty plus VAT, ensuring fair treatment for all retailers.
Anthony Thunström, CEO of TFG, recently highlighted the collaborative efforts with the South African Revenue Service (SARS) and customs authorities. “We have been working closely with SARS and customs to ensure we operate on a level playing field,” said Thunström. “Over the last few months, there has been significantly better enforcement from SARS and customs.”
While the Trade and Industry Ministry has been known to micromanage and create red tape, Levitt praises this legislation as a critical intervention. “This piece of legislation is crucial in protecting local businesses from unfair competition and supporting the development of a robust e-commerce sector in South Africa.”
