How, when, and why you should pay excise
Much like SARS can claim tax on a local entity’s income and imports, it can also tax South African companies on manufactured goods, providing these goods meet certain criteria. This type of tax is called excise.
Goods that incur excise duties and levies are generally high-volume consumables, as well as products that are considered non-essential (luxury) items. This includes liquor, tobacco products, cosmetics, and petroleum.
Paying excise is required mainly as a means of boosting state income. As a secondary function, excise duties and levies exist to lift retail prices, thereby discouraging South African consumers from purchasing products that are harmful to their health and to the environment. It is therefore informally referred to as sin-tax.
Businesses who intend to produce these goods and incur excise tax are expected to register as a Customs and Excise manufacturing warehouse before manufacturing starts.
To determine whether a particular commodity incurs excise, please consult our Excise Tax Lookup.
What is a Customs and Excise manufacturing warehouse?
A customs and excise manufacturing warehouse is an allocated space where dutiable goods may be manufactured and taxed once declared to customs. Contact our consultants for more information on registering an excise manufacturing warehouse on your premises.
Manufacturers of excisable goods may also store manufactured goods in a Customs and Excise storage warehouse until the goods are either exported or made available for local sale. This enables a company to avoid paying excise if exporting, or to delay the payment for the sake of managing cash flow if selling to the local market. Delaying excise payment is therefore especially useful for manufacturers of seasonal goods, like wine.
Although these warehouses are not owned by customs, the goods deposited therein are strictly controlled and may be audited by customs at any time.
Companies who register both a storage warehouse (also referred to as a bond store or a rebate store) and a manufacturing warehouse on their premises must ensure the two locations are separated and comply to their respective customs regulations.
How to pay Excise
The responsibility to keep track of excisable production and pay the correct amount of excise lies with the manufacturing company. SARS reserves the right to audit financial and production records to ensure compliance.
Excise payments are due to SARS on either a monthly or quarterly basis, depending on the requirements of the product.
Non-payment of Excise
SARS may only claim excise on goods consumed within the Southern African Customs Union (SACU). Manufacturers who export their goods are therefore exempt from paying Excise tax as long as the goods are:
- Shown to be exported according to SARS regulations.
- Consumed outside of the Southern African Customs Union.
- Manufactured and stored in an approved customs and excise warehouse until exported.
Making use of an Excise storage warehouse therefore enables international traders to offer their products at a more competitive price, even if is not exported immediately after coming out of production.
Types of excise applicable to traders
Excise on Ad Valorem Products
These products are considered “luxury items” and are taxed by means of excise duty collected from the manufacturer. Typical ad valorem products include motor vehicles, electronic equipment (like computers), cosmetics and perfume.
Health Promotion Levy (HPL) on sugary beverages
Excise on surgery beverages was implemented within Customs and Excise legislation in 2017 to support the Department of Health’s endeavours of decreasing diabetes, obesity, and other related diseases in South Africa.
HPL is applicable to surgery beverages (specified in Schedule No. 1 Part 7, Section A of the Customs Act) which are manufactured in South Africa, as well as imported from abroad.
Manufactures of sugary beverages NOT exceeding 500 kilogram per calendar year are regarded as a non-commercial manufacturer and may apply for exemption from this levy.
Excise on tobacco products
Tobacco Products, which consist of cigarettes, cigars, cigarette tobacco and pipe tobacco, are subject to the payment of excise duty if consumed within the Southern African Customs Union.
Excise on Alcohol products
This tax is imposed on the producers of alcohol products consumed within the Southern African Customs Union according to the following classifications.
- Tax on malt beer – Payable by manufacturers of clear beer made from malt with an alcoholic strength of usually between 3 and 6 percent per volume.
- Tax on traditional African beer – Payable by manufacturers of traditional beer generally defined as non-clear beer made from sorghum or malt with an alcoholic strength of usually less than 5 percent per volume.
- Tax on wine and vermouth – Payable by manufacturers of alcoholic beverages obtained through the natural fermentation of fresh grapes to an alcoholic strength of usually between 8 and 15 percent per volume. The product is defined as vermouth if flavouring agents are added in production.
- Tax on other fermented beverages – Payable by manufacturers of alcoholic products produced in the same way as wine and vermouth, but from fruit types other than grapes.
- Tax on spirits – Payable by manufacturers of ethyl alcohol obtained from the distillation of various base products to an alcoholic strength of usually more than 60 percent per volume.
Excise on petroleum products
Petroleum products include petrol, diesel, bio-diesel, unmarked aliphatic hydrocarbon solvents and unmarked illuminating kerosene (unmarked paraffin).
Besides incurring excise duty, these products are subject to the payment of a fuel levy and road accident fund (RAF) levy if consumed within South Africa. If the products are consumed within a different SACU member state only excise duty is payable.
International oil pollution compensation fund (IOPCF) levy
The IOPCF, an establishment of the International Convention on Civil Liability for Oil Pollution Damage of 1992, as well as the Fund Convention of 1992, provides compensation for victims of oil pollution who do not obtain full compensation under the Civil Liability Convention.
South Africa is one of only three member countries who opted for contribution to the IOPCF, and therefore collect this levy. Under the IOPCF rules, importers of oil into a member country are responsible to contribute to the IOPCF directly, only if the member chooses to contribute to the fund. The other two contributing countries are Canada and Israel.
South African importers of “contributing oil” (basically crude and heavy fuel oil) in excess of 150,000 metric tonnes per annum are required to pay the IOPCF levy. This is also applicable to oil delivered by sea to a non-member county and delivered by land into South Africa.
Environmental levies consist of the following:
- Carbon tax – Imposed on entities in the country responsible for generating carbon emissions to discourage production, consumption, and investment decisions responsible for furthering climate change.
- Levy on electric filament lamps – Imposed on manufacturers of electric light bulbs that are non-energy saving
- Electricity generation levy – Imposed on South African producers of electricity using non-renewable (fossil) fuels and environmentally hazardous (nuclear) sources by means of a generator.
- Motor vehicle (CO2) emissions tax – Payable by manufacturers of new vehicles in South Africa.
- Levy on plastic bags – Payable by manufacturers of certain types of plastic carrier and flat bags, the disposal of which is littering the environment. Funds appropriated by imposing this levy are earmarked to establish re-cycling facilities.
- Levy on tyres – The disposal of used tyres pose a serious threat to the environment. Manufactures are therefore levied on the production of tyres. This levy is also intended for funding of recycling efforts.
Diamond export levy
A Diamond Export Levy on unpolished diamonds exported from the RSA was introduced in 2008 and mandated to SARS for administration and collection.
The aim of the Diamond Export Levy is to promote the development of the South African economy, aid skills development, and create employment by encouraging the local diamond industry to process (cut, polish etc.) diamonds locally.
Need assistance with registering as an importer or exporter, a rebate user or to pay excise? Our knowledgeable trade consultants are just a phone call away and ready to assist with any queries regarding international trade.
About the author
Frieda-Marié de Jager
With a degree in design from CPUT, Frieda-Marié started her career in digital and content marketing in 2013. Since joining Import Export License in 2019, she’s created several e-books, guides, blog posts, and newsletters on international trade. On weekends you can find her building Lego with the family, walking her beagle, or whipping up a storm in the kitchen.