Big Tax Hikes for Temu and Shein Clothing Orders in South Africa

Starting next month, South African shoppers will face significant tax increases on low-value and small-volume clothing orders from popular online retailers Temu and Shein, as reported by Business Times. This development comes as part of a broader effort by the South African Revenue Service (SARS) to support local industry and level the playing field for domestic retailers.

From July 1, 2024, all imported clothing parcels will be subjected to a hefty 45% import duty plus Value Added Tax (VAT), as confirmed by The Foschini Group (TFG) CEO Anthony Thunström. “It’s a big move, and I think it will help local industry, including local production and jobs,” Thunström stated.

This policy change addresses long-standing complaints from local clothing retailers and textile industry stakeholders. They have argued that Chinese companies like Shein and Temu were exploiting a tax loophole, known as the de minimis rule, which allowed parcels valued under R500 to pass through customs with only a 20% import duty and no VAT. In contrast, South African retailers had to pay the full 45% duty plus VAT on their imported clothing, placing them at a competitive disadvantage.

To illustrate the impact of the new tax regime, consider an example of a R100 clothing order from Shein or Temu. Under the previous tax policy, this order would incur an additional R20 in tax, with no VAT applied, bringing the total cost to R120. However, under the new regulations, the same order will attract a R45 import duty and R21.75 in VAT, raising the total price to R166.75—a 39% increase from the previous total.

Local retailers have welcomed the move, anticipating that it will help curb the influx of cheap imports and boost local production. By closing the tax loophole, the government aims to create a fairer market environment and encourage the growth of domestic businesses.

As South Africa prepares for the implementation of these new tax rules, consumers who frequently shop from international platforms like Shein and Temu may need to brace for higher costs. The broader implications for the e-commerce landscape and consumer behavior in the country remain to be seen, but this significant tax hike marks a pivotal shift in South Africa’s trade and economic policy.