Every country has a specific levy attached to goods and products brought within its borders from other countries. These levies called Custom duty or Import duty, are usually paid for several reasons. Three major reasons for custom duties are to generate revenue for the government, boost the economy of the country and also protect locally made products and goods. South Africa is a country with its own local car manufacturing plant, and the government is particular about seeing its automobile sector bloom and satisfy the needs of its citizens. Hence, there are a number of restrictions to cars that can be imported to South Africa. Vehicles that can be imported to South Africa include;
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- Specially designed vehicle
- Vintage vehicles of 40 years or older.
- Inherited vehicles
- Racing car
Importing second hand vehicles always attracts a cost called used car duties or in general, import duties. However, if you are an immigrant changing your place of permanent residency, you may be allowed to Import one motor vehicle free of duty and also granted exemption from VAT( Value Added Tax). However, there are certain other criteria you need to be eligible for this exemption, these includes;
Criteria You Need To Be Eligible From Customs Duty As An Immigrant
South African customs will require you to make a declaration to apply for exemption from Duty and VAT using form DA304A. To be fully eligible for this exempt, you must:
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- Be the registered owner of the vehicle for a period of no less than 12 months.
- Be changing your permanent residency to South Africa.
- On importation you must not sell, hire, exchange or otherwise dispose of the vehicle for a period of at least 2 years
Types Of Customs Duties In South Africa
FREE: These are goods from certain regions free from customs duties. However, these goods are still subject to VAT which must be paid.
Ad Valorem Tax: This implies Fixed percentages of the value of goods. Ad Valorem tax is usually levied on up-scale market goods or luxury goods such as cars, machinery, etc. It can be 10%, 15%, or 25% of the value of the good as determined by the customs.
Compound Tax: This is a combination of rated and ad valorem duties applicable to goods mentioned in the same tariff heading. E.g 20% + 8 cents per kg
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How To Calculate Import Duty On Used Cars
Custom duties on used cars are usually calculated based on the age of the car and it’s value:
- For vehicles up to 20 years old may be applied at a rate of up to 36%
- With vehicles in excess of 20 years old being subject to a rate of 20%.
- An ad valorem duty rate may also be applied (based on a sliding scale) at a rate of between 0.75% and 20% of the vehicle depending on the age and value of the vehicle.
- VAT, if payable, is charged at a standard rate of 15%. The South African VAT act sets the value on which VAT is calculated as being the value of goods plus customs duty levied plus a further 10% of that value.
Let’s say you are importing a used 2020 BMW i3 with a commercial invoice of R550,000, the customs duty is 36%
Hence, the duty payable = 36% of R550,000
= R198 000
An Ad Valorem duty of 15% is levied
15% of R 550,000= R 82,500
VAT of 15%
Value of the car + 10%= R550,000 + 10% of 550,000= R 605,000 ( This value is called Added Value Tax (AVT))
VAT of 15% = 15% of R605,000
Hence, total duty payable on import of a BMW i3 to South Africa = R( 198,000 + 82,500+ 90,750)
Hence, total cost of the BMW i3 = R 550,000 + R 371,250
= R 921, 250
The custom cost associated with importing used cars explains why these cars tend to be expensive. However, there is a belief that buying a foreign used car is more long-lasting and efficient than buying a locally used car. Most foreign used cars are as good as new because of their exterior, inner and engine features. When you want to import a used car to South Africa, the content of this article will serve as a good guide for you.
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