The question of how to import donations duty free is particularly relevant in South Africa with the number of welfare, educational, religious, and other non-profit organisations increasingly reliant on overseas gifts and donations to continue their work in the country.
(A similar scenario relates to importing or receiving samples, gifts and personal items from abroad. This is not covered in this article, but comprehensive information on the topic can be found here).
Customs duties and import taxes are levied on imports into South Africa. So, how do these apply to donations from abroad? How do they impact the giver and receiver? Thanks to the Value-Added Tax Act 89 of 1991 (VAT Act) and Schedule 4 of the Customs and Excise Act 91 of 1964, certain organisations are eligible for a VAT exemption and customs duty rebate where specified conditions are met.
If you are involved in an organisation that receives donations from abroad, this blog will help you navigate the VAT and customs duty payments and requirements when receiving goods from overseas forwarded free as a donation or gift.
Legislative framework
We will briefly look at the pertinent details from both the Acts mentioned above.
Schedule 4 to the Customs and Excise Act 91 of 1964
According to this Schedule, all imported goods incur customs duty as per the rates in Schedule 1 of the Act. However, Schedule 4 of the Act, under rebate items 405.04/00.00/04.00, 405.04/00.00/05.00 and 405.04/00.00/06.00, provides for full duty rebates on goods forwarded free as donations to certain organisations where specific conditions are met. The conditions for full duty rebates under these items are summarised as follows:
- The organisation is registered in terms of the National Welfare Act (1978), and the donated goods will either be distributed free of charge or for official use by the organisation. Clothing items are excluded.
- The organization is an educational, religious, welfare, sporting or hospital organisation that receives the donated goods and the organisation undertakes either to distribute the goods free of charge or to use them; and not to obtain any monetary gain from, for example, sale or hire of the goods, unless the rebate is paid back in full. Clothing and foodstuffs are excluded.
Value-Added Tax Act 89 of 1991
VAT is levied on any goods imported into South Africa, according to Section 7(1)(b) of the VAT Act. Section 13 of the VAT Act discusses exemptions from VAT. Specifically, Paragraph 5 of Schedule 1 describes the VAT exemption on goods forwarded free as donations by a non-resident of South Africa where specific conditions are met.
Essentially, the conditions described in the VAT Act mirror those of the Customs and Excise Act as far as the responsibilities of the recipient go. The qualifying recipients are extended to include a public authority or a municipality, as well as non-profit organisations as stated above.
What must I do to access the duty rebate and/or VAT exemption?
To benefit from these customs duty rebates and VAT exemptions, your organisation will need to:
Register as an importer
Qualifying organisations that intend to import goods into South Africa must first register as an importer with the South African Revenue Services (SARS). Once this is done, the application can be made for an import permit or rebate permit.
Obtain a rebate permit
Goods donated for good causes under these rebates are governed by the International Trade Administration Commission (ITAC). ITAC will check that the quantities and conditions are acceptable and that the local industry will not be negatively affected by the receipt of the donation before issuing the permit.
Regulated goods may require an additional import permit
Donated used/second-hand goods are subject to import control measures and require an additional import permit. This permit will only be considered after the rebate permit has been issued. Although, as mentioned earlier, clothing items are excluded from rebates for donations, there are certain items of second-hand clothing (e.g., raincoats, overcoats, ski jackets) that can receive a partial rebate of duty under rebate item 460.11. of the Customs and Excise Act.
Goods that are on custom’s regulated and restricted items list may also require an additional permit. You can view this list on our calculator’s page.
Apply for VAT exemption
Where your non-profit organisation receives foreign donations, these may be exempt from VAT on importation provided the conditions described earlier are met. SARS handles these donations on a case-by-case basis. You will therefore need to get the necessary details regarding the application process and required documentation from SARS by emailing them (VATExamption@sars.gov.za) prior to clearing the goods.
Clearance of goods
When clearing the goods, your clearing agent will need the above-mentioned permits.
To complete the customs declaration, “NC” must be entered in the “Actual Price” field as the goods are donated free of charge. You will also need to enter an “Additional Information Code” which reflects the value-added tax exemption (VTE) code, the reference number, and the date of such permission.
South Africa has put legislation in place to avoid the levying of VAT and customs duties on gifts from abroad intended for the upliftment of those in need in our country. Navigating the documentation required to obtain the full donation free of charge, as intended by the giver, to the benefit of your organisation, can be challenging. Our knowledgeable consultants can be contacted on 087 550 1038 to assist you.