Introduction
Proposed amendments to the Value-Added Tax Act ("VAT Act") aim to lawfully bring an end to the VAT relief previously afforded to low-value imports. Although the legislative amendment is still pending, South Africa effectively phased out VAT relief on low-value imports as of 1 September 2024 according to a media release issued by the South Africa Revenue Service (SARS) last year. We had initially provided our comments on the then "interim measure" here. The current draft proposal thus primarily aims at aligning the legislation with this interim measure, with formal implementation to follow on a date to be announced by the Minister. The 2025 Draft Taxation Laws Amendment Bill proposes formally scrapping the de minimis rules that let many small consignments enter South Africa without the imposition of import VAT (currently levied at a rate of 15%). The enactment of these proposed changes have a direct financial and operational impact on businesses importing into South Africa.
Current position
Under the current wording of the legislation, goods imported into South Africa and valued at ZAR 500 (c. EUR 25) or less for customs duty purposes are exempt from import VAT if no customs duty is payable. However, what occurs in practice is different as many stakeholders have reportedly already been charged with VAT on low-value imports as of September 2024 in accordance with the so-called interim measure implemented by SARS at the time. The legislation of these changes will ensure that all low-value imports, including printed materials such as books, newspapers, journals and periodicals that have been imported by post will be subject to VAT. These carve-outs were used widely as cross-border shopping has accelerated over the years.
The proposed amendment
National Treasury now proposes formally removing the thresholds that, while still reflected in the letter of the law, have not applied in practice for quite some time. The purpose being to ensure that VAT now applies to all imported goods regardless of value. National Treasury's policy intent is straightforward: level the playing field between local vendors that must charge VAT on every sale and offshore sellers whose small consignments have (at least until 1 September 2024) entered VAT-free. The scale of the low-value trade industry is by no means immaterial and National Treasury, drawing on findings of the OECD, cites that "more than 131 billion parcels were shipped globally in 2020, representing a 27% year-on-year growth." This is, at least for National Treasury, a stark reminder of how eCommerce has multiplied small cross-border shipments. At the same time, reliance on voluntary compliance by offshore parties has created revenue and enforcement gaps that are difficult to police at scale. The proposal seeks to close those gaps without recreating bottlenecks at the border.
Why this matters?
For retailers, brands and eCommerce platforms, the immediate impact is on landed costs and customer communication. While offshore competitors have in the recent past enjoyed a pricing advantage thanks to the exclusion of import VAT, the proposal is set to see that benefit fall away for good. Businesses that import into South Africa from outside the country should pin down who bears import VAT and clearance fees. Domestic retailers may gain competitive neutrality but should still expect some pass-through of new clearance fees into consumer pricing. Consumers on the other hand should expect higher costs on their small international purchases.
What's next?
There are still some open questions that industry should help shape during consultation. National Treasury’s proposal emphasises border collection paired with simplified entry. To that end and pursuant to the Budget 2024 announcement that SARS would review the approach to packages imported through eCommerce, the proposed amendment introduces a simplified regime for the entry of goods imported or exported via express door-to-door delivery. Qualifying parcels may be entered using a simplified bill of entry, with these procedures and requirements expected to be clarified in terms of new rules to the Customs and Excise Act (which are still forthcoming). Only goods below an upper limit – determined by the Minister of Finance in consultation with the Minister of Trade and Industry – may be entered under these simplified procedures.
It is also worth noting that removing the ZAR 100 postal relief for books, newspapers, journals and periodicals may also have unintended consequences for educational supply chains and small publishers, an area where targeted implementation guidance could mitigate disruption.
What should businesses do now:
- Identify where pricing has relied on VAT-free entry
- Engage carriers and brokers on simplified-entry readiness
- Update checkout copy and customer communications to reflect VAT at import
- Prepare finance and tax teams to reconcile import VAT on small parcel flows
With comments on the proposed amendments due by 12 September 2025, interested stakeholders are encouraged to reach out to their advisors to share their views with National Treasury.
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Massimo Iovino, Trainee Solicitor, has contributed to this legal update.
