Calculating Import Duties & VAT
Did you know that import duties and VAT can make a significant difference to the final price of your imports? The price you see on your supplier invoice is seldom the price you end up paying for the landed goods after you receive your Custom’s bill.
It is essential to know how to calculate import duties and VAT. Knowing the final cost upfront will help you determine whether your imports will be profitable and within your budgeted price range. The good news is that if you are a VAT registered vendor, you may claim back VAT on your imports.
How to calculate import duties
Customs can charge import duties in four ways, namely:
- Free (no import duty or tax payable);
- Rated or specific;
- Ad valorum; or
- Compounded (combination of rated and ad valorum)
Table 1 provides an example of how each duty works.
|Type of duty||Example|
|Rated or specific||“10 cents per square meter” or “3 cents per dozen”|
|Ad valorem (fixed percentages of the value)||“10% of the value” or “25% of the value”|
|Compound (combination of rated and ad valorem duties applicable to goods mentioned in the same tariff heading)||“20% + 8 cents per kg” or “50 cents per square meter less 20%”|
Note: The rate of duty you are liable to pay may differ depending on the country you are importing the goods from. If you are importing from an EU, EFTA, MERCOSUR or SADC country, different rates apply. Make sure that you look up the correct rate of duty.
Once you’ve looked up the duty tax rate, calculate the total duty tax liable as per the examples below. Add this duty tax to the purchase price of your goods to determine your total landed cost.
Rated or specific calculation:
Volume of goods = 1000m², Duty tax = 30c per M²
Total duty tax = 1000 x 30c = 30 000 cents or R300
Ad Valorem Calculation:
Cost of goods = R1000, Percentage duty tax = 25%
Total duty tax = R1000 x 25/100 = R250
How to calculate VAT
Now that you have your import duty, you can calculate how much VAT you are liable to pay. The VAT must be paid before your goods are cleared at customs.
Calculate the VAT as follows:
Product price on commercial invoice (e.g. R100)
+ 10% of commercial invoice (e.g. R10)
+ duty tax (e.g. if duty tax percentage is 20% then R20 is added)
= Total (e.g. R130)
15% VAT is levied on the total amount.
You can perform the above calculation automatically on our free VAT and Import Duty Calculator.
An important note to importers trading with BLNS countries:
On 1 February 2020, SARS implemented technical system enhancements. The system change relates to the calculation of VAT on goods imported for home use from Botswana, Lesotho, Namibia and Eswatini (the BLNS countries), specifically the legal provisions of section 13(2) of the Value-Added Tax Act, of 1991 and rule 120A.02(a) of the Rules to the Customs and Excise Act 91 of 1964.
This section states that where the origin of such goods is from non-BLNS countries, the goods are subject to an upliftment of the VAT value by a factor of 10%, in the calculation of VAT payable at the time of clearance into the Republic of South Africa. In essence, this implies a mark-up of the customs value by 10%, upon which VAT of 15% is calculated.
This means no mark-up is applied on the importation of goods originating in BLNS countries and cleared for home consumption (i.e. for the South African market). Only VAT of 15% is calculated on the customs value. Importers, registered agents and clearing agents are reminded of their obligation to comply with the above-mentioned legal provisions.
About the author
Tracy studied at Stellenbosch University and gained her initial experience in imports and exports through working for industry. After starting her own import business, and helping some friends do the same, she realised there was a need for reliable customs registration services. As a result, in 2011, Import Export License was born. Since then thousands of importers and exporters have been helped to obtain their import export licences, permits, specialised customs registrations and connect with Import Export License consultants for advice on importing, exporting, and other customs related matters.