Paying taxes can be a confusing endeavour at the best of times. On the other hand, trying to work out your tax rates after a trip overseas can seem downright impossible. Before doing any calculations you’ll first need to find out what type of tax you’re paying in the first place. This is usually where customs duties come in. How is Customs Duty Calculated in South Africa?
Customs duties or Custom taxes are extra costs added to the Customs Value of goods when entering the country, their goal is to raise revenue and protect local markets.
The cost of customs duties is determined by the classification of the item. In other words, you’ll have to figure out how your goods are classified before being able to work out the added costs.
Certain items in small quantities are considered ‘duty-free’ if placed within accompanied baggage. These items include, but may not exceed –
- 200 cigarettes and 20 cigars per person
- 250g of tobacco per person
- 50ml of perfume and 250ml of eau de toilette per person
- 2 litres of wine per person
- 1 litre of other types of alcohol per person
- Goods in accompanied baggage totalling in value less than R5 000, not including personal effects
Once you’ve figured out your custom duties you’ll still have work to do to figure out exactly how much to pay.
How do I Work out my Import Taxes?
The equation to keep in mind when calculating your import costs goes something like this –
(Customs Value + 10% origin tax) + (all relevant customs taxes)
= Added Tax Value (ATV)
= ATV x 15% VAT
= Actual Amount Payable
That’s a lot of new terms and taxes to take in so let’s go through them one by one –
- Customs Value – This refers to the total value of the goods you’re importing. If, for example, you’re bringing 10 hats into the country each valued at R100 your Customs Value will be R1000.
- Origin Tax – An origin tax of 10% is added when importing from most countries. The countries exempt from this tax are those within the Customs Union, namely – Botswana, Lesotho, Namibia, and Swaziland.
- Customs taxes – As mentioned, this tax depends on the classification of your goods and will usually range between 0-30%. There are also additional taxes depending on the item in question, most commonly this includes an Ad Valorem tax on ‘luxury items’.
- Added Tax Value (ATV) – Once you’ve added all the relevant duties, you’ll end up with your ATV. When you work out the VAT of your items it will be based on this number and not your Customs Value.
- VAT – Value Added Tax is the extra levy that needs no introduction. Most people will already be familiar with it but it’s important to remember that it is calculated as 15% of your ATV and not of your original item value.
- Amount Payable – After adding the VAT costs, you should end up with the amount you will need to pay in tax on the items you wish to bring into the country.
Obviously, this can become a little bit tricky to piece together, especially if maths is not your forte. Luckily there are many helpful Tax Calculators available online that can do most of the work for you.
Alternatively, you may want to skip the hassle and pay a flat-rate tax.
What is a Flat-Rate Assessment? – How is Customs Duty Calculated in South Africa?
If you can’t be bothered with all these calculations and if your items amount to less than R20 000, you can choose to pay a flat tax of 20%. What this means is that instead of calculating the total after multiple types of taxes, you can just pay a 20% tax on the value of your items. This flat tax also prevents you from paying VAT.
Sounds pretty good, right? Well, it can be, but keep in mind that many of your goods may end up being exempt from Customs Duties and thus you may end up paying 20% in total when you would’ve only paid 15% in VAT.
Simply put, the Flat-Rate Assessment can be a handy little trick for savvy travellers but might cause you to pay extra if you aren’t careful. In some cases, the item being imported can even result in a different kind of duty tax altogether.
What is a Specific Duty?
While you’re most likely to encounter a fixed value-based tax when importing goods, there are instances in which an item may be taxed based on its quantity. This is known as a specific duty and is usually calculated by charging a tax of a few cents per kilogram or a similar unit of measurement.
How do you Appeal a Customs Classification?
There will, of course, be times when a customs official classifies an import for a specific tax code but this decision is not agreed upon by the importer. Many people believe that their imports should be categorized differently which could have a massive effect on the overall tax.
In such scenarios, the standard procedure is to take the matter to the immediate supervisor of the original customs agent. If you still don’t agree with the classification you can lodge a formal Internal Administrative Appeal (IAA). If you still are not content with the decision you may then appeal for Alternative Dispute Resolution (ADR).
For most of us, it would probably be easier to just pay the tax as is, but for individuals who import in bulk, a change in their customs classification could make a world of difference.
What is the Punishment for Not paying your Customs duty?
As you can imagine, many people will stop at nothing to get out of paying extra taxes and paying customs duty is no exception. This can, however, come at a heavy cost.
There are many ways in which a person may end up not paying their customs duty but all forms can be classified as either, –
- Tax evasion or
- Tax avoidance
Penalties can differ greatly depending on how your actions are viewed. If, for example, you simply refuse to pay your duties or knowingly classify an import under an incorrect tax category with a lower tax rate, you will most likely be accused of tax evasion which is viewed by SARS as an offence and can carry with it serious fines and even jail time.
On the other hand, some individuals try to find loopholes such as moving goods as ‘gifts’ which can sometimes be duty-free. This doesn’t always work but could be seen simply as tax avoidance which is generally not considered a crime.
In conclusion – How is Customs Duty Calculated in South Africa and what are the Penalties for not Paying it?
Certain goods valued at under R5 000 can oftentimes be brought into the country duty-free as part of your accompanied luggage. When the value exceeds this amount or when you import specific items you may need to pay a particular tax called a customs duty. The amount of this tax is normally based on the classification of the item. Certain items are taxed at higher rates than others while high-quantity goods are sometimes taxed based on their size or weight.
Once you have determined the tax classification of your goods you will then need to follow a simple equation to work out how much you’ll need to pay when importing them.
The equation is as follows –
(Value of the goods + 10% origin tax*) + (Customs duty)
= (New amount) X 15% VAT
= Final amount payable
*The origin tax only applies to countries outside of South Africa’s Customs Union.
If you do not pay this tax or knowingly attempt to underpay by incorrectly classifying your goods, you may be found guilty of tax evasion which is a serious offence that can result in steep fines and even jail time.
Some people choose to pay a flat-rate assessment tax rather than the standard customs duty. This involves paying a 20% tax on all goods instead of paying for both customs and VAT taxes. This can be a money-saving move if your customs duties are over 20%, however, as many items are often duty-free or only incur minor tax rates, this decision could end up costing even more.
Disclaimer LAW101: All of our posts are for research purposes only. Law 101 aims to assist its readers with useful information on the laws of our country that can guide you to make decisions in line with the South African Governmental Laws currently in place. Although in many instances, our posts cite the constitution, they are intended to assist readers who are looking to expand their knowledge of the law. Should you require specific legal advice we advise you to get in touch with a qualified legal expert.
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