• Temu and Shein and other foreign clothes retailers will have to apply a 45 percent VAT mark-up on imports valued at less than R500.
• These changes will apply from 1st July this year.
• This comes after local fashion brands and clothes retailers approached SARS and government with concerns.

As of 1st July 2024, local imports from Chinese ecommerce giants like Shein and Temu will be taxed the same as clothes purchased from South African retailers.

These measures stem from the government and were drafted after retailer bodies including The Foschini Group appealed to the South African Revenue Services (SARS) and Customs to do more to level the playing field between local companies and the Chinese fast-fashion and uber-cheap marketplace giants.

As per a Sunday Times report, packages valued under R500 from Shein and Temu being imported locally will receive a 45 percent value added tax (VAT) mark-up as of next month. This is the same rate that local clothing retailers have to pay, the lobbyists say.

This is an enormous price mark-up for both companies which are known for their cheap products. Local retailers have long accused both firms of exploiting numerous smaller imports to dodge certain tax regulations and balloon profits.

Now, customers will have to face hefty price increases on items if the total value of the package being sent is lower than R500. For example, a R300 package would become R435 after the new VAT is included next month.

This may lead to more customers shifting to buying bulk orders instead of numerous smaller orders, but with larger orders, you will have to pay more in terms of customs fees due to weight restrictions.

Local retailers are hoping this may level the playing field, but customers used to enjoying cheap clothing and other items from the two Chinese firms may not be too keen on the change.

Both Shein and Temu, which are unrelated companies from the same country, have enjoyed unrivalled popularity the world over. In 2022, Shein became the best-selling fashion retailer worldwide, and this year just two months after launching locally, Temu became the most popular app in South Africa, being downloaded more than even WhatsApp.

The massive appeal and cheap prices lead to massive profits, which often get local regulators and consumer watchdogs weary. Locally, retailers have long alleged tax evasion was the key to their cheap products.

Temu responded that in fact, it was the company’s “efficient supply chain” and logistics management that saw its prices remain low, and not dodging any local taxes. This statement has been shared by Temu to most media in the country that have come asking.

In Europe, regulators lodged a complaint against Temu, alleging that the company infringes on a number of rules in the Digital Services Act (DSA). Including using manipulative practices to get customers to spend more money and failing to show who are the traders selling on its platform.

Temu told Hypertext that it was committed to transparency and full compliance with local regulations.

We have reached out to the firm seeking comment about the recent changes and the new tax that will be applied in July. Temu has yet to respond as of time of writing, but we will update this article as soon as we receive a response.