The National Treasury has proposed scrapping the tax-free threshold on low-value imported goods, a move that will subject all purchases from international e-commerce platforms like Shein and Temu to a 15% Value-Added Tax (VAT) in addition to existing customs duties.
As detailed in the 2025 Draft Tax Bills, the proposal seeks to remove ‘low customs value consignment relief‘ entirely, which previously allowed imports valued under R500 to enter without VAT. This change would subject all inbound parcels to both the standard 15% VAT and a 20% flat customs duty rate.
Daily Investor reports that Chinese eCommerce giants Shein and Temu have leveraged this relief to gain a significant cost advantage, splitting orders to stay under the R500 threshold and avoid taxes. This practice has allowed them to capture an estimated R7.3 billion in sales in 2024 alone, accounting for over a third of South Africa’s online clothing sales.
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In contrast, local retailers importing goods in bulk have always paid full duties and VAT, putting them at a competitive disadvantage. The Treasury’s proposal follows November 2024 measures by SARS to introduce VAT on all imports and reconfigure the flat rate system.
As study commissioned by the Localisation Support Fund (LSF) via reports from the Daily Investor, it found that the rise of Shein and Temu has ‘diverted demand away from domestic value chains,’ potentially costing the economy over 8,100 jobs that have not materialized, with two-thirds in retail and one-third in manufacturing. Under a high-growth scenario without intervention, this impact could grow to over 34,000 jobs displaced by 2030.
However, some analyses, including a report from the Boston Consulting Group (BCG), note that international players can bring benefits such as lower consumer prices, increased eCommerce adoption, and potential regional hub opportunities for South Africa.
In anticipation of these changes, Shein has updated its platform to include import duties at checkout, covering customs duties, VAT, and other fees. This addresses a significant pain point for South African customers who previously had to pay duties separately upon delivery.
The proposal is part of broader draft tax legislation that also addresses foreign retirement benefits, airtime vouchers, and carbon tax phases.
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