Temu and Shein clampdown in South Africa

South African Revenue Service (SARS) Commissioner Edward Kieswetter said they would continue to clamp down on Temu, Shein, and other online retailers.

Chinese online retailers, including Temu and Shein, have been in the firing line in recent months for using tax loopholes to undercut South African competitors.

They are accused of abusing the de minimis rule to get clothing parcels of under R500 through customs with a 20% import duty and 0% VAT.

Retailers claim Temu and Shein break up larger orders into smaller quantities and packages to ensure they are under R500.

Once they have benefitted from the lower 20% tax, they combine these orders again before shipping them to clients.

South African clothing retailers complain they must pay the 45% plus value-added tax (VAT) for imported clothes.

National Clothing Retail Federation (NCRF), Michael Lawrence said their research points to widespread abuse by Temu and Shein.

“These companies are not paying duties on their imports and are avoiding paying VAT where it should be applied,” he said.

He explained that these eCommerce giants’ local couriers and service providers are not reporting their duties and taxes correctly to SARS.

“There have not been any invoices that show the correct revenue collection from authorities about VAT and tariffs at this point,” he said.

Lawrence claimed the details were either incorrectly declared or miscategorised on the invoice.

The NCRF reported the culprits to SARS and requested that the Department of Trade, Industry, and Competition investigate the matter.

The higher taxes put local retailers at a big disadvantage in trying to compete against direct-from-China importers like Temu and Shein.

Jean-Louis Nel, tax director at Van Huyssteens Commercial Attorneys, said this is uncompetitive because it does not stimulate the local market.

It puts South African retailers under a great deal of pressure because consumers will prefer lower-priced items.

TFG CEO Anthony Thunström said local retailers have been working with the South African Revenue Service and Customs to create a level playing field.

“It’s a big move, and I think it will help local industry, including local production and jobs,” said Thunström.

SARS responds

To address this issue, SARS and Customs have committed to levy the same duties and taxes on clothing items under R500 as on bigger orders.

SARS Commissioner Edward Kieswetter told News24 they would continue clamping down on “unfair advantages created by international online retailers and eCommerce platforms”.

Kieswetter said the state lost out on more than R3 billion in unpaid taxes and is actively addressing this problem.

He admitted to News24 that SARS was “playing catch-up on updating its tax rules and administration processes to collect taxes from these platforms and their users”.

The new changes mean that South African shoppers can expect to pay more for their Temu and Shein orders.

While SARS is working to close the tax loopholes, Temu and Shein deny they were doing anything wrong.

Temu said it was committed to complying with local laws and regulations in the markets where it operates.

“For South Africa, the displayed prices of goods on Temu South Africa do not include import duties and taxes,” it said.

It explained that local authorities will impose applicable taxes on customers upon the arrival of the package.

“In our commitment to providing the best service to our customers and adhering to local customs laws,” it said.

“Temu collaborates with a reputable logistics company with extensive experience in e-commerce packaging.”

“The logistics company acts as our customers’ agent with the local customs and tax authorities to clear the package, process, and remit applicable taxes.”

Shein said its orders do not benefit from any favourable tax treatment compared to other offline or online retailers.

They said another common misconception was that it could only offer such low prices by dodging local import taxes.

“Contrary to common misperceptions, we keep prices affordable through our technology-based on-demand business model and flexible supply chain,” Shein said.

“This reduces inefficiency, helps us to lower wastage of material, and reduces our unsold inventory. We pass this cost advantage to our customers.

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