Managing VAT on imported goods
When and how to use VAT exemptions, VAT refunds and claiming back input tax
Value-added tax (VAT) is an indirect tax charged on the consumption of goods and services in South Africa. To learn more about how VAT works, read our Basic Guide to VAT blog.
When importing goods into South Africa, import VAT may be leviable along with Customs import duty tax. Learn more about import duty tax here.
When is import VAT due
Value-added tax, similar to customs duty, is payable at the time of entry for home consumption. Therefore, VAT needs to be paid before Customs allows clearance of the goods into South Africa, unless the importation is VAT exempt as discussed below.
Deducting import VAT as input tax
VAT paid on the importation of goods by a vendor may be deducted as input tax, subject to the following:
- VAT may only be deducted during the tax period when the goods are released.
- For purposes of deducting the VAT paid on the importation of goods, the vendor making the deduction must be in possession of the following documentation, to be provided by your clearing agent:
- An “EDI Customs Status 1 Release Message”
- A valid bill of entry or other document prescribed by the Customs and Excise Act (for example, form SAD 500 and any additional SAD document that might be required).
- The receipt number for the payment of such tax, that is, the receipt issued on eFiling.
Deferment of import VAT payment
Registered customs clients may apply to defer the payment of customs duty and VAT for a period of up to thirty days. Read more about how to use deferment accounts here. Many clearing agents make use of deferment accounts. They can then charge their client’s VAT and duty tax to their deferment account at the time of customs clearance, and receive payment from their clients during the 30 day period thereafter before payment needs to be made to SARS. If VAT payment has been deferred this way, importers may only claim the import VAT as input tax during the tax period in which the clearing agent actually pays the VAT over to SARS customs.
Delay payment of import VAT with use of a bond store.
A bond store, also known as a customs storage warehouse or OS store, is a customs registered secured area for the storage of dutiable goods. Instead of paying VAT and import duty tax at the time a shipments lands in South Africa, imported goods can be transported to and stored in a bond store. The VAT and import duty tax is only liable to be paid when the goods are removed from the store, and only on the individual items that are removed. This is a good option for importers who import items with a high import tax outlay in bulk, and want to gradually pay the tax as the items are used or sold. No VAT or duty tax is due on items exported directly from a bond store.
Bond stores need to comply customs storage warehouse regulations, a customs official will do an inspection to verify compliance before registration. Customs officials have full access to this area and may monitor goods that enter and leave it at any time. Imported goods need to be transported to the bond store by a registered remover of goods in bond or transporter.
Exemption of import VAT
Certain specific categories of imported goods are exempt from VAT. These exemptions are set forth in Schedule 1 of the VAT Act.
In order to qualify for an exemption, the goods must fall under one of the descriptions of the VAT exemption item, any requirements or limitations contained in that particular description must be complied with, and the notes of the item number must be complied with.
Some examples of Schedule 1 items that qualify for exemption:
- Goods imported into the Republic from or via Botswana, Lesotho, Namibia or Swaziland
- Goods of no commercial value
- Goods imported with an international carnet
- Goods not exceeding R500
- Goods temporarily exported from South African and thereafter returned to the exporter, no change of ownership having taken place
- Goods for educational, religious or welfare purposes
- Travellers’ cheques and bills of exchange, denominated in a foreign currency
- Motor vehicles imported by natural persons for own use, on change of permanent residence to South Africa
- Goods imported by immigrants, tourists, returning residents and other passengers, for their personal use
- Goods temporarily imported for processing and export
- For a complete list, refer to schedule 1 of the VAT Act
Refund of import VAT
SARS will refund the VAT paid on goods imported into South Africa by means of a General Application for Refund (CR1) in the following instances:
- The importer is a non-registered VAT vendor.
- Duplicate clearance, that is, more than one import declaration has been processed in respect of the importation of the same goods.
- The clearing agent has invoiced and processed the import documentation in the incorrect importer’s name (does not include a clearing agent who has invoiced and processed the import documentation incorrectly in the name of the correct importer).
- Substitution, that is, the goods have been cleared under the incorrect customs procedure code (CPC) resulting in the original import declaration being substituted by a new import declaration reflecting the correct CPC and VAT is paid a second time.
In all other instances, if the registered vendor overpaid VAT on a bill entry, the total VAT paid may be claimed as input tax, subject to meeting all the requirements for making such deduction (VAT 201). Import VAT refunds may be claimed up to five years after the tax period when the import VAT was paid.
Need help calculating your Value-Added Tax? – refer to our VAT and Import Duty calculator
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.