How To Calculate Customs VAT And Duties

By Tevait Feanle •  Updated: 01/23/24 •  6 min read

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:

However, if you import from a BLNS country (Botswana, Swaziland, Lesotho, or Namibia), that last 10% falls away. Instead, it uses this breakdown:

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.

Calculating Duties

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:

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:

  1. Identify the correct HS code for your imported goods.
  2. Refer to the South African Customs Tariff Book, which contains a list of HS codes and their corresponding duty rates.
  3. 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:

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.

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