Most small discounts of a few percentage points may be acceptable to SARS when clearing goods through Customs. The problem arises when the discounted amount is excessive.
Naturally, the Customs legislation requires that any / all discounts must be reflected on the commercial invoice. The nature or type of discount must also be reflected on the invoice, i.e. 5% discount for advance payment.
Determining whether the percentage of discount is excessive or not, requires knowledge of one’s industry. Anything outside of industry norms will be regarded as excessive. In any event, any discount of more than 2 – 5% will likely result in a Customs valuation investigation of some sort. The Customs intervention of discounts is important for:
· Determining if duty and Vat is being avoided
· Anti-competitive behavior affecting the domestic economy
· Generally protecting the domestic economy
Unfair competition normally arises when the buyer and seller are related to one another, and if such a relationship is restrictive in any way or form. In other words, if the relationship restricts other parties in the importing country from benefiting from the same discount.
The type of discount being offered, and when the discount was offered will also affect the applicability of the discount in the Customs valuation. Generally, discounts must have being offered and applied prior to the shipment being dispatched. In other words, the discount must have being an element in fixing the price. Also, the consignee must have earned the discount legitimately.
The SARS Policy SC-CR-A-05 dated 24 January 2014 titled Method 1 Valuation on Imports provides an array of important information regarding discounts. If in doubt, this policy should be consulted in depth.
In the same vein, any commissions, royalties, kickbacks and the like must also be reflected on the commercial invoice.