Based on goals set by the South African Department of Health, SARS may impose levies (taxes) on goods entering our market that pose a risk to the health of South African people. These taxes are imposed to decrease consumption of unhealthy products and to generate income for the state.
Income from health levies goes towards the government healthcare budget. In turn, because higher retail prices discourage consumption, and reduced consumption drives a general improvement in health, the tax creates some relief for public health resources.
Health levies apply to relevant goods that are imported and sold locally (as a customs levy), as well as relevant goods that are manufactured within South Africa and consumed here (as an excise levy).
Goods that are imported for export, or manufactured for export, are therefore exempt from incurring health levies. Practically speaking, the importer or manufacturer must store the goods in bond until the time it is exported to avoid the levy. If this is not possible, they may pay the levy and apply for a drawback to redeem it after export. Read more on keeping bonded goods or on drawbacks and refunds.
What goods incur SARS Health Levies?
Health levies are payable in accordance with Schedule 1 Part 7 of the Custom and Excise Act
Currently, the only tax payable under Schedule 7 is the Health Promotion Levy on Sugary Beverages (Schedule 1 Part 7A). This levy took effect in April 2018 to decrease diabetes, obesity, and other related diseases among South Africans. More specifically, this levy intends to discourage the local availability of beverages with a sugar content of more the 4g per 100ml to reduce the risk of health issues and tooth decay in consumers of sugary beverages.
To determine whether a beverage, including liquid and powder concentrates, that you manufacture or import qualifies for this tax, you must check whether its HS code (tariff code) is listed in Schedule 1 Part 7A.
When is the Health Promotion Levy on Sugary Beverages payable?
The levy is payable in addition to any other Customs and Excise tax imposed on your import or product.
If you are importing sugary beverages with a tariff code listed in Schedule 1 Part 7A, the levy is payable to SARS upon import customs clearance.
If you are manufacturing sugary beverages with a tariff code listed in Schedule 1 Part 7A, the levy is payable when the product is market ready. Because this is an Excise levy for the purpose of local manufacturing, the beverages may only be produced in a registered Excise manufacturing warehouse. Excise payable on the manufacturing of any excisable goods can be declared and settled via eFiling. Compliance is monitored by Excise audits and non-compliance is punishable by criminal prosecution, license suspension or removal, and hefty fines.
Who must pay a Health Promotion Levy on Sugary Beverages?
All importers and commercial scale manufacturers of qualifying sugary beverages in the Republic of South Africa are subject to this levy. This levy does not apply to other members of the Southern African Customs Union (SACU).
SARS defines commercial scale manufacturers as entities who manufacture or expect to manufacture, sugary beverages with a total sugar content exceeding 500 kilograms per calendar year.
Non-Commercial manufacturers who manufacture, or expect to manufacture, sugary beverages with a total sugar content of less than 500 kilograms per calendar year must still register an Excise manufacturing warehouse but may apply for exemption from the Health Promotion Levy on Sugary Beverages.
If the same entity manufactures sugary beverages at more than one premises, the total production is taken into account.
Imports are liable for the levy regardless of the sugar content of goods imported per year and must pay the levy on a per-shipment basis.
How is the Health Promotion Levy on Sugary Beverages calculated?
The rate is fixed per gram of sugar content within a beverage that exceeds 4 grams per 100ml. The first 4 grams per 100ml are levy free. The sugar content refers to both the intrinsic nature of a beverage (natural sugar) as well as added sugar and other sweetening matter. Note that alcoholic beverages are excluded from this levy, but do incur excise separately in accordance with Schedule 1 Part 2.
The sugar content of a beverage is calculated based on certified test reports from a testing facility accredited by the South African National Accreditation System (SANAS) or the International Laboratory Accreditation Cooperation (ILAC). The results of the test are valid for 5 years or until anything regarding the composition of the beverage changes. For powder and liquid concentrates, sugar content is calculated on the total volume of the prepared beverage.
In the absence of such a valid test report, SARS calculates the levy on a deemed (assumed) sugar content of 20 grams per 100ml.
The recipes and test results for all product lines must be submitted with Excise registration. If another product line is introduced, or if an existing recipe is changed, the registration must be amended accordingly.
Need assistance with your Customs and Excise registrations, or just some friendly advice on how to prepare your company for import and export? Simply get in touch.
