International sales tax and SA Customs VAT calculation (imported goods)

marantz123

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Fellows,

Suppose a purchase is made in the USA, and shipped to a local (USA) forwarding depot (for forwarding to SA) : under these circumstances sales tax is due in the USA on items shipped to a local USA destination. Is this tax value supposed to be excluded or included in the SA Customs VAT / Duty calculation on arrival of the item in SA ? 

example:

You purchase a $100 item in the USA and ship it to the closest freight-forwarder there. The local (USA) destination incurrs 8.8% sales tax ($8.8) which is disclosed in the billing/invoice which you have paid. The item is then forwarded to SA and subjected to SA Customs Duty and Excise. Is the sales tax paid at the international destination ($8.8 in the USA) included or excluded in the SA Customs / VAT / Duty calculation ?  (Discuss for 15 marks).

Thanks
Marantz123.
 

2wice

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I tried this before, but you need to convince the vendor upfront that it is for export. I never got this right if the parcel was sent to a forwarder, as there is scope for tax fraud.

Tax paid at origin has no bearing on the ZA tax code, if understood correctly and from experience.

(eaoe)
 

FranZAR

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@ScottulusMaximus will know.

Sent from my SM-G988B using Tapatalk

 

Drifter

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https://www.aramexglobalshopper.com/en/faqs/48747/Am-I-liable-to-Pay-for-Tax-on-a-purchase-in-the-Country-of-Origin-as-well-as-when-the-shipment-enters-South-Africa

The USA has no federal sales tax HOWEVER all but 5 of the states charges state sales tax.
When goods are shipped to a forwarding location outside of that state's border, the vendor may include the delivery state's sales tax - the way that this works differs from state to state.
https://www.thebalance.com/sales-taxes-across-state-lines-4058714
In order to determine the sales tax that you will be charged, you would need to determine the state that the vendor you buy it from is located in, what state the forwarding location is in and, if these are two different states what that vendor's state policy is around sales taxes on across state line sales.

The USA does not charge sales tax on exports. Generally the ship to location is used to determine if it is an export. In your case, it is a local USA sale as the invoice's ship to location will be the forwarding location in the USA.

When the goods arrive in SA import duties and import VAT will be calculated on the landed cost. In SA landed cost is based on Free on Board costing, so the landed cost consists of the invoice amount, freight, insurance and other charges to get it to its final destination.

It is a general trade principle not to calculate tax on tax. In your case, the invoice value will indicate the state sales tax but this should be excluded from the invoice amount for landed cost purposes.

*disclaimer: I'm just an accountant not a global trade expert. The above is a principle based explanation and I am pretty sure that it is correct.

^Tip: Buy from a vendor located in one of the sales tax free states and make sure that the forwarding location is in that same state. In the case there will be no sales tax on your purchase.
 

chrisc

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Years ago I got an amp part from a vendor in Falstaff, Arizona.  The invoice showed the sales tax as a separate item and the DA50 based the CIF value on the pre-tax $ price

I just assumed that this was the normal way CIF values are calculated

The last 3 shipments from Parts Express do not even mention sales tax, so I presume that this was not charged.  Local sales In Dayton, Ohio attract 9% sales tax
 

Scubadude

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Every commodity has an HS Code, short for Harmonized Commodity Description and Coding System. And every government decides which of these commodity codes to tax and by how much. The tarriff book can be downloaded here: https://www.sars.gov.za/wp-content/uploads/Legal/SCEA1964/LAPD-LPrim-Tariff-2012-04-Schedule-No-1-Part-1-Chapters-1-to-99.pdf

It is best to tell the seller what HS code to use, or it may be misclassified on arrival. [member=746]chrisc[/member] cleverly noticed that anything to do with computers is free of customs duty. 
 

marantz123

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Greetings all,

Thank you for the views and feedback. I concur with [member=13448]Drifter[/member] , tax on tax doesn't seem right, this was my initial inkling on this. Tax cannot be classified as a commodity or an item of purchase such that it could/might/may attract (further) tax. Yet to find out how SA really treats international sales tax in practice.

I agree, getting the seller to include the tariff code and a proper invoice description (other than "spare parts" which doesn't cut it) is a good idea, I've tried this, is not easy..didn't work out. With (foreign) tax laws I guess that an uninformed seller would be reluctant to put anything unfamiliar on an invoice. Your best bet is to rename the invoice (file name) to include the tariff code when saving the file and refer to that for the clearance. A proper description of the item ( eg. Bicycle pedal part) needs to be disclosed within the invoice though. Having your ducks in a row lessens any liability on the request for a bill of correction if it can be seen clearly that information for the clearance wasn't obscure in the first place.

Thanks.

 

SphereCDI

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Howsit howsit.

[member=16849]marantz123[/member] we deal with this very often, but case in point is that regardless of what the item is and what the cost is, should an item be purchased and sent to a local Freight company the local taxes would either be claimed back, on formal export, if the paper trail is correct - ie the sales agent is exporting the product officially, and is registered to do so, or the costs are incurred but don't become part of the calculated landed cost on the ZA size.

you're correct in saying tax on tax doesn't sound right - but it all comes down to that little piece of paper issued with the product. In so many cases we've seen end users and customers bring product in from overseas for far cheaper than what it costs in SA, even against what we sell at trade, because they've McGuyvered the original invoice for a far lower declared value than the actual cost on the goods. The onus then rests on the customs guys who submit for clearance to be clued up enough as to what the products actually are. If you get caught its a hefty penalty.

Having very clearly stated HS codes helps massively, yes.
 

marantz123

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Chris - CDI said:
Howsit howsit.

[member=16849]marantz123[/member] we deal with this very often, but case in point is that regardless of what the item is and what the cost is, should an item be purchased and sent to a local Freight company the local taxes would either be claimed back, on formal export, if the paper trail is correct - ie the sales agent is exporting the product officially, and is registered to do so, or the costs are incurred but don't become part of the calculated landed cost on the ZA size.

you're correct in saying tax on tax doesn't sound right - but it all comes down to that little piece of paper issued with the product. In so many cases we've seen end users and customers bring product in from overseas for far cheaper than what it costs in SA, even against what we sell at trade, because they've McGuyvered the original invoice for a far lower declared value than the actual cost on the goods. The onus then rests on the customs guys who submit for clearance to be clued up enough as to what the products actually are. If you get caught its a hefty penalty.

Having very clearly stated HS codes helps massively, yes.

[member=351]Chris - CDI[/member]  thank you, your first paragraph mentions the reclaiming of tax paid. This did occur to me, however chose not to mention it. Is such tax reclaimed legally by the forwarding agent, hence passing on the benefit to the customer in some way, or is the tax reclaimed by the seller (I doubt that this is legal though) ?

Agree, if someone jippos a sales receipt, that constitutes fraud and attracts a penalty when caught. It is not necessary to Macguyver an invoice. It could also be the middlemans markup on his imports which may create a stark contrast to the prices attained by an individual honest in his importing.  :be: but I hear you, funny things happen. Also, fair enough, for the middleman, a service and possibly a warranty/guarantee is offerred which attracts costs in addition to a markup which may validate the pricing.
 

SphereCDI

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Any tax paid in a country can only legally be reclaimed by an entity registered for tax in that country, as far as I'm aware. We're fortunate that we have a business in the UK and in SA, but it still doesn't make it any less complicated and headachy. Taxes can also only be claimed back on export, with appropriate documentation. Usually for export sellers they wouldn't even bother with local taxes, as the claiming process is a ball ache.

As to the invoicing, you'd be surprised. We were able to purchase Sony products (eg projectors) at retail including VAT in the UK, and import them completely legitimately, and the landed cost here in SA was at worst on par with the trade price dealers were buying at locally. middlemen schmiddlemen. if you exclude shipping, duties and vat, our pricing aims to be bang on par with overseas prices specifically to discourage this...
 

Vinotinto81

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I have arranged import of goods from USA/Japan/any other countries for these 3 or 4 years, SA customs always charges SA VAT against goods price(incl VAT at origin), Freight, and insurance if any = CIF value which [member=746]chrisc[/member] advised previously.
VAT at the origin is only reclaimed at that place or we have to ask the possibility of any DutyFree (VAT Free) process at the origin "before" ordering the purchase, I understand.

when I purchase abroad, I estimate around 20% or more to original goods price, as the SA VAT when import.

 

Drifter

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The general rules of sales tax (whether VAT or GST) are:
- GST & VAT are both indirect taxes meant to be charged on goods and services when consumed locally
- If goods and services are exported, sales tax is generally charged at a zero rate
- Goods/services are sold when the rights and rewards of ownership passes, this is usually at the point of generating a sales invoice
- Goods are deemed to be exported if the vendor sends it directly to a customer with at a foreign address (direct sale)



In your example, you will "take possession" of the goods at the location of the warehouse of your forwarding agent. In this case it is a local sale so your vendor must charge GST. The sales invoice will have added GST added to it
The goods are then exported by the forwarding agent (indirect export).

In your scenario, there is no way to recover the GST that you had to pay.

VAT is different and most countries that have VAT (rather than GST) have a way of reclaiming VAT on exports (for both the vendor and buyer).

 

ron g

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marantz123 said:
Fellows,

Suppose a purchase is made in the USA, and shipped to a local (USA) forwarding depot (for forwarding to SA) : under these circumstances sales tax is due in the USA on items shipped to a local USA destination. Is this tax value supposed to be excluded or included in the SA Customs VAT / Duty calculation on arrival of the item in SA ? 

example:

You purchase a $100 item in the USA and ship it to the closest freight-forwarder there. The local (USA) destination incurrs 8.8% sales tax ($8.8) which is disclosed in the billing/invoice which you have paid. The item is then forwarded to SA and subjected to SA Customs Duty and Excise. Is the sales tax paid at the international destination ($8.8 in the USA) included or excluded in the SA Customs / VAT / Duty calculation ?  (Discuss for 15 marks).

Thanks
Marantz123.

indirect exports (items sold to a qualifying person, & delivered in a country for export)  can be zero rated.
however this can expose the seller to risk as actual export will need to be proved by the seller. most retailers won't even entertain this option as a result.
company i worked for occassionally got this request - usually in respect of avionics for foreign registered aircraft in sa.

goods coming into sa are subject to a 10% upliftment factor on the declared price.

so: (100 + 10%) x 15%, an effective rate of 16.5%.
if imported for a taxable supply, by a vat vendor, the full 16.5% is reclaimable as inputs.
 

ScottulusMaximus

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marantz123 said:
Fellows,

Suppose a purchase is made in the USA, and shipped to a local (USA) forwarding depot (for forwarding to SA) : under these circumstances sales tax is due in the USA on items shipped to a local USA destination. Is this tax value supposed to be excluded or included in the SA Customs VAT / Duty calculation on arrival of the item in SA ? 

example:

You purchase a $100 item in the USA and ship it to the closest freight-forwarder there. The local (USA) destination incurrs 8.8% sales tax ($8.8) which is disclosed in the billing/invoice which you have paid. The item is then forwarded to SA and subjected to SA Customs Duty and Excise. Is the sales tax paid at the international destination ($8.8 in the USA) included or excluded in the SA Customs / VAT / Duty calculation ?  (Discuss for 15 marks).

Thanks
Marantz123.

It shouldn't be but using forwarders it generally is, they just use the total invoice amount for the customs VAT value as this is technically the FOB cost of the shipment. You will struggle to get a retailer delivering to a forwarding address to remove sales tax, can be done with smaller companies used to exporting but you've got no chance at the big guys.

Duties if applicable are charged on the line item value not total invoice amount.

Doing a "regular" old school import the seller won't be charging you local sales tax so the issue doesn't arise.
 
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