While many of us are familiar with the day-to-day VAT system in South Africa, with the basic flat rate of 15%, there is another category of VAT and duties to consider if you are in the import business- customs duty. Today, we are looking into this class of VAT and duty more closely, with some important information you should be aware of if you are importing and exporting goods in South Africa.
How To Calculate Customs VAT And Duties
We will cover the basics of how to calculate Customs VAT and duties in South Africa below. However, this is a very complex area of tax legislation and one which needs a lot of in-depth study and familiarity if you work in the industry. Aspects like where your goods originate from and what type of goods they are, could impact the process. So make sure you are well versed in your specific industry or use a tax practitioner who is to help you.
At the most basic, VAT on imported goods uses a system called Added Tax Value (ATV). This breaks down as follows:
- The value for customs, plus the duty levied on the goods, plus 10% of the customs value.
However, if you import from a BLNS country (Botswana, Swaziland, Lesotho, or Namibia), that last 10% falls away. Instead, it uses this breakdown:
- Customs value, plus the duty levied on the goods.
VAT is then added to these amounts. The VAT rate remains the same as for other South African businesses. That is currently 15%, although it is set to rise shortly.
Customs duty is a very involved system and usually needs specialist tax advice. However, in brief, it revolves around the harmonized system code (HS code) assigned to the type of goods. This then influences what duty rate will be applied. You can find the HS code for your goods by referring to the South African Customs Tariff Book, a comprehensive document that categorizes products into specific codes and duty rates.
Calculating Customs VAT
Customs VAT is a separate component of the import cost and is calculated based on the total cost of the goods, including the customs value and customs duties. The standard VAT rate in South Africa is 15%, but this will likely rise shortly. Supplement the 15% used below with the new VAT rate if so. To calculate the Customs VAT on your shipment, use the following formula:
- Customs VAT = (Customs Value + Customs Duties and other charges) x 15%
In addition to customs duties and VAT, you may have additional charges associated with your shipment, such as handling fees, insurance, and excise duties, depending on the goods and the shipping method. These should be factored into your overall cost calculation.
How Are Customs Duties Calculated?
Customs duties in South Africa are calculated based on the HS code we explained above, which is basically a product classification system. Each HS code corresponds to a specific duty rate, determined by the type of goods and their country of origin. To calculate customs duties, follow these steps:
- Identify the correct HS code for your imported goods.
- Refer to the South African Customs Tariff Book, which contains a list of HS codes and their corresponding duty rates.
- Multiply the value of your goods by the applicable duty rate to calculate the customs duties.
It is essential to ensure that you classify your goods accurately, as misclassification can result in incorrect duty calculations and potential penalties.
How Much VAT Do I Pay For Customs Duty?
The amount of VAT you pay for customs duty is calculated based on the total cost of your shipment, including the customs value and customs duties. However, once these additional calculations are done, you will use the same VAT rate as for ‘normal’ purchases within South Africa’s borders, which is currently 15%. To determine the Customs VAT amount, use the following formula:
Customs VAT = (Customs Value + Customs Duties) x 15%
This formula applies to most imported goods, but there may be specific exemptions or variations for certain products, so you should always make sure you have the correct information from a tax practitioner skilled in customs and excise duty if you do a lot of importing and exporting of goods. It is a very unique and rather complex area of tax law.
What Percentage Is Customs VAT In South Africa?
While there are other unique charges involved in the customs process which are calculated before you calculate customs VAT, like calculating your customs duty on the shipment, you will still use the same standard VAT rate (15%) as other South African businesses. Remember that VAT calculation is the last step in the customs process, and other additions (like duty) should be added to the amount first.
How Do You Calculate VAT On A Shipment?
To calculate VAT on a shipment, follow these steps:
- Determine the customs value of your goods. This typically includes the purchase price, shipping costs, insurance, and other charges related to the importation.
- Calculate the customs duties by identifying the appropriate HS code and corresponding duty rate for your goods. Multiply the customs value by the duty rate.
- Calculate the Customs VAT by applying a 15% rate to the sum of the customs value and customs duties.
The total VAT on your shipment will be the Customs VAT amount you reach through this process.
Do You Pay VAT On Imports In South Africa?
Yes, VAT is payable on imports in South Africa. Importers are required to pay VAT on the total cost of their shipments, which includes the customs value, customs duties, and any additional fees or charges related to the importation. Always remember that you will calculate VAT last, after all other adjustments are made.
Customs VAT is relatively simple and works similarly to VAT in other aspects of business in South Africa. However, you need to make sure the customs value you are using includes fees, tariffs, duty, and all other applicable amounts before you calculate the customs VAT, and this can be a tricky process needing specialist knowledge. Hopefully, however, you now understand the basics of calculating customs VAT and duties considerably better.
How To Check VAT Refund Status
Today we will walk you through how to How To Check VAT Refund Status in South Africa, as well as some other tips and tricks around refunds.
Can You Claim VAT on Car Insurance?
This detailed manual will cover the essential components of VAT concerning automobile insurance in South Africa
Can You Claim VAT on the Commission Paid in South Africa?
This guide provides insights into claiming VAT on commission paid in South Africa, understanding the calculation of VAT on commission
How To Check The Validity Of A VAT Number
How do you check the validity of a VAT number? Today we look at convenient ways to do so, as well as some other important issues you should consider.
How to Do A VAT Registration On eFiling
There are different methods you can consider to register for VAT. This guide explains how you can do a VAT registration on eFiling.
How to Complete a VAT 101 Form
This guide explains everything you need to know about VAT registration. How to Complete a VAT 101 Form
How Much Percentage Is VAT In South Africa?
Today we will delve into the VAT rate, what items are VAT-free, how to calculate the 15% VAT in South Africa
What Businesses Are VAT-Exempt?
What Businesses Are VAT-Exempt?. Today we will look deeper into all three cases, and how to know if they apply to you.
Are Salaries Exempt from VAT?
This piece seeks to elucidate how Salaries are treated under VAT in South Africa, differentiate between zero-rated and exempt supplies
Can a South African Sole Proprietor Register for VAT?
This comprehensive guide will address this question and provide insights into VAT registration for sole proprietors
What is the Difference Between TAX and VAT?
There are two main characters in the tax story that individuals and businesses meet quite often - income tax and VAT.
How Much Is the Fine for Late VAT Return?
This guide explores the penalties for late VAT return submissions in South Africa, how late payment interest and penalties are calculated
Difference Between VAT and TAX?
What Is the Difference Between VAT and Tax in South Africa? This guide explains the difference between VAT and tax.