Welcome to this special edition of the magazine that will focus on Customs deferments. As you are aware, each publication focuses on a specific theme to share information and insights to make it easier for traders to meet their tax obligations. Above all, it aims to draw attention to the different incentives that are available for Customs and Excise traders.
You will recall that the previous publication explained the Authorised Economic Operator, and highlighted the many benefits of saving costs and time for traders who are involved in the import and export trade business at the various ports/borders.
But before we delve into the current theme of Customs deferments, let us give a quick update on some important initiatives that the South African Revenue Service (SARS) has undertaken to make things easier for both traders and taxpayers.
On 26 January 2024, SARS joined the trade community in celebrating International Customs Day, under the theme “Engaging traditional and new partners with purpose”. Of course, the message comes at the right time as it opens activities and sets the tone for what we will focus on in 2024.
In other news, good progress is being made on the implementation of the African Continental Free Trade Area (AfCTFA) Agreement. A number of countries have finalised the necessary domestic legislations for the mplementation of their respective tarriff reduction commitments and are now legible to trade with South Africa under the AfCFTA. On 31 January 2024, the Minister of Trade Industry and Competition lauched the start of the preferential trade by South Africa and SARS certified two consignments destined for Ghana and Kenya.
Please note that all the necessary informaiton regarding the required legal instruments and approved tarriff offers to and from participating countries was published on the SARS website on 26 January 2024 and traders must be registered with SARS as exporters or producers before they can trade under the AfCTFA.
What is Customs deferment?
In simple language, deferment is a mechanism for delinking duty payment and Customs clearance. It is based on the principle of ‘Clear first; pay later’.
This facility is available to existing registered or licensed customs clients to defer payment of duty for a specified period and up to a maximum amount of Customs duty and Value Added Tax (VAT). A bond/guarantee, which will set the amount required to secure participation in this scheme, is required. No locally manufactured goods, (duties and levies) may be deferred under this scheme.
The payment of Customs duties and VAT, in accordance with section 39(1)(b), at the time of importation, may be deferred for up to 30 days.
This is to help clients to manage cash flow and reduce the administrative burden of paying a duty for each transaction.
Note: Deferment accounts are payable within seven calendar days from the close of the deferment account period. The date may differ from one client to another.
What is the deferment qualifying criteria?
To apply for deferment, the client must:
- Be registered or licensed with the Customs authority and have a valid Customs code;
- Have a good compliance record with no outstanding debts; and
- Have a bank guarantee or bond that covers the maximum amount of duty/VAT that can be deferred in a month.
Can the deferment process always be utilised when doing import and export trade?
No. Deferment is only to be used for the purposes for which it was approved. No duties and levies on locally manufactured goods may be deferred onto an approved deferment account.
Furthermore, the deferment applies to duties and VAT only. Therefore, penalties and forfeitures, etc. are excluded. Traders may only use the deferment at the offices listed upon their application and for the specified amounts as approved.
Where importers make use of the services of an intermediary, such a Clearing Agent, they must furnish the representative with a power of attorney and provide SARS with a certified copy. The importer must retain the original, which should be readily available for inspection by SARS as and when required.
How do traders apply for the deferment facility?
They need to complete and submit the following forms at their nearest Customs office:
- DA 650: Application for Deferment of Payment of Customs Duties and/or Value-Added Tax; and
- DA 652: Application for Registration as a Deferment Client.
They can download these forms from the SARS website on ww.sars.gov.za or obtain them from any Customs branch. They must accurately fill in the forms and attach all the required supporting documents, such as:
- A copy of their identity document(s) or passport(s);
- A copy of their Customs code;
- A copy of their bank statement or a letter from their bank confirming their account details;
- A copy of their financial statements or audited accounts for the last two years;
- A letter from their auditor or accountant confirming their financial position and ability to pay the deferred amounts;
- A letter from their surety or guarantor confirming the amount and terms of the surety or guarantee; and
- Any other documents that Customs may request.
They must indicate the total limit required in duty and VAT on the DA 650 form. The amount of surety or guarantee to be provided will be determined by Customs.
They can find more information on the surety or guarantee requirements in the Bonds external standards on the SARS website (www.sars.gov.za).
What are the obligations of the deferment facility?
The deferment facility imposes some obligations on them, namely, that they must:
- Maintain the payment dates as listed in the application form, security and certificate and, if alterations are required, inform SARS of such on time;
- Closely monitor the interim Customs Statement of Account (CSA) and take prompt corrective action to increase the deferment level when required to do so or correct any incorrect information on the CSA;
- Ensure that their accounts are accurate and complete, that all unallocated credits are resolved prior to the statement period end date and that any outstanding debt is settled within the defined payment terms;
- Pay their account via eFiling and if eFiling is not available, ensure that alternative arrangement have been agreed to;
- If the date falls on a public holiday or weekend, ensure that payment occurs on the last working day before this date;
- Keep accurate and complete records of all their import transactions and deferment payments for at least five years;
- Comply with all the Customs laws and regulations and maintain a good compliance record;
- Notify Customs of any changes in their business or financial circumstances that may affect their eligibility or suitability for the deferment facility; and
- Allow Customs to inspect, audit, or verify their records, premises, and operations at any time.
Failure to comply with any of the obligations of the deferment facility, will result in penalties, interest, suspension, or cancellation of the scheme. They may also lose their surety or guarantee and be liable for the full payment of the deferred duty and VAT.
How to use deferment?
Once the client has been approved for deferment, they can use it for any Customs declaration that is eligible for deferment. The client must indicate on the declaration that they are using deferment and provide their deferment account number. The Customs authority will then calculate the amount of duty that is deferred and add it to the client’s deferment account.
The client will receive a monthly statement that shows the total amount of duty deferred for the month and the due date for payment. The client must pay the full amount by the due date. If not, they will incur penalties and interest, and their deferment facility will be suspended or revoked.
SARS policies stipulate that penalties and interests may be imposed when the deferment payment agreement terms have not been complied with, such as delayed payment or payment after the agreed due date.
SARS has noted the challenges that traders may face when the payment due date falls on a weekend or a public holiday.
In fact, a significant number of traders make late payments around this period, citing reasons ranging from their office finance personnel being on leave to their systems being offline, etc. This is evident from the SARS internal penalty appeals records where the regional Internal Administrative Appeals Committees are flooded with requests for leniency after penalties and interests have been issued.
To avoid penalties and, thus, enjoy the benefits of the Customs deferment, traders are urged to always ensure that proper internal arrangements and/or additional alternative arrangements are made to ascertain that payments are made on or before the last working day before the weekend or public holiday.
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