**E-Commerce Giants Temu and Shein Face Headwinds in South Africa Amidst Tax Changes**
The meteoric rise of e-commerce platforms Temu and Shein in South Africa, which dominated shopping trends for much of 2024, could be facing challenges in the coming months. Their popularity, fueled by low prices, especially in the clothing sector, has attracted the attention of the South African Revenue Service (SARS) who are implementing and enforcing new tax regulations.
Shein, already established in the local market, saw a significant boost with the launch of Temu in January 2024. This surge in orders led to logistical issues with their local delivery partners. The appeal of these platforms stemmed largely from their competitive pricing that undercut local retailers, particularly in the clothing sector. This led to accusations that they were taking advantage of tax loopholes.
The loophole in question was a SARS concession from 2007 that allowed for simplified clearing of low-value imports under R500. The flat duty of approximately 20% charged on these orders proved beneficial to platforms like Temu and Shein. This was in contrast to local textile retailers who faced duties of 45% plus 15% VAT.
However, This advantage was set to end, as the scale of the issue became apparant to SARS. In July 2024 Commissioner Edward Kieswetter stated these “loopholes” had resulted in an estimated R3.5 billion in fiscal losses. He vowed to crackdown on the unfair advantage enjoyed by e-commerce giants over local businesses, acknowledging the 2007 rules were no longer in step with the popularity of online shopping. Back then, he noted, “it was a couple of people buying from Amazon.com and Alibaba.”
SARS announced a change to import tax rules, aligning them with the World Customs Organisation (WCO) framework and implemented them by September 2024. The changes included adding VAT to the 20% flat duty charged on orders from Temu and Shein. SARS also planned to reconfigure the import duties, which came into effect on 1 November 2024, with different categories:
* **Category 1:** Documents – No tax, immediate release.
* **Category 2:** Low-value items below R500 – No tax, immediate release.
* **Category 3:** Low-value dutiable items (simplified declaration) – Above the R500 threshold.
* **Category 4:** High-value items (full declaration) – Items that do not fall into the other categories.
**Post-Implementation Tax Confusion**
While these new tax regulations are expected to impact the popularity of Temu and Shein in South Africa, a recent analysis of orders showed that there continues to be confusion over the correct tax rates applied. Post-November 1 2024, import duties have fluctuated from 11% to 32%.
Some orders seemed to have unusually low tax charges of just 11% despite the 15% VAT threshold. However, other orders were taxed at the expected 15% while others still were taxed at rates from 21 – 26% on items that were not clothing. One clothing order had an effective tax rate of 32%.
This variation raises questions about the consistent implementation of the new import tax rules and whether the correct duty was applied. These inconsistencies have raised concerns highlighting a potential lack of clarity regarding this tax implementation.
**Here’s a summary of recent order data:**
| Store | Clothing Included | Order Value | Import Taxes | Tax Percentage |
| ———– | ———– | ———– | ———– | ———– |
| Temu | Yes | R536 | R168.80 | 32% |
| Shein | No | R692 | R178.21 | 26% |
| Temu | No | R404 | R90.50 | 22% |
| Temu | No | R553 | R118.00 | 21% |
| Temu | No | R1,096 | R165.50 | 15% |
| Temu | No | R411 | R45.04 | 11% |
The future of Temu and Shein in South Africa appears uncertain as they contend with increased tax burdens and an unclear tax framework. These changes will likely reshape South Africa’s e-commerce landscape.
