Customs Duties and VAT

Customs are the official government department who administer and collect duties/ taxes levied on imported goods. Customs duties are levied with a twofold aim namely raising revenue and local market protection. Raising revenue is self explanatory and essentially the propose of all taxes and so we will no delve too deeply on this point. Below is a basic breakdown as to how duties are determined, levied and calculated.


First goods must be calcified, which is done (in most countries) via the World Customs Organisation. They have developed a system which places goods into categories, sub categories and so on. As an extension individual countries are allowed to further subdivide categories according to the level of calcification they require. The system is a number-description system which as one could imagine may at times be open for interpretation.


All goods, according to their classification are allocated duty rates (even if it is zero), usually calculated as a percentage of the value of the goods (ad valorem). However in some cases goods attract rates of duty calculated as cents per unit for example, per kilogram or metre (specific).  The rate itself is determined by customs based on many factors including country of origin and/ or manufacture. In some cases goods from one country my carry duties whereas the same goods from a different, preferred origin (a country with trade agreements) would not.


Besides customs duties there may be import restrictions, prohibitions and/or anti-dumping and countervailing duties. These simply put are duties imposed with the intention of relief from imports that are sold at less than fair value (“dumped”) or which benefit from subsidies provided through foreign government programs. These are rare and the rate imposed will depend on the result of the investigations.


Each country has its own set of taxes, rules and manners of calculating them. For instance, some countries will use simplified systems for goods below a certain value or for goods of non-commercial purpose (personal use). Either way there is an important distinction between customs duties and VAT (Value Added Tax) which in many/ most cases would also apply. That is to say once goods have been dutied they are subject to VAT as well.


From the above, which is an exceedingly simplified breakdown, it is easy to see how the importer could misstep and end up laden with charges they never budgeted for. This is why it is imperative that you align with qualified, local experts, before attempting an import. Often even a seasoned importer can benefit from the advice and guidance of a “new provider” but there can be no doubt, trying to go it alone inevitably leads to misfortune.


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