Import Duties: Understand how it’s applied in Purchase Orders and Goods Received Vouchers

Let's show you how Import Duties is applied in a Sage Evolution company. In here you’ll learn more about its background and how to properly process it on a Purchase Order / Goods Received Voucher Importation Split screen.

A) Import Duties: Background information

Import Duties Definition 

Import Duties is the tax collected on imports and some exports by a country's customs authorities. A good's value will usually dictate the import duty. Depending on the context, import duty may also be known as a customs duty, tariff, import tax or import tariff.

Also consider the following advice: 

  • Your local Tax Authority may or may not allow companies to claim back the full portion of Import Duties (Import Tax) paid to their shipping agents when purchasing goods from foreign countries. Please therefore first confirm this with your local Tax Authority before considering implementing the advice in this article. 
  • If allowed, you should therefore need to use/setup a Tax Type that calculates a 100% VAT (Tax) amount in order to show the full Import Duties portion on the Tax Type report.


B) Scenario background 

To further explain, refer to the scenario below to demonstrate how an Evolution user should process, to eventually claim back the full portion of Import Duties:

  • The Evolution client is purchasing the following goods from his US based currency supplier called MACS
    • Item F-SET x 10 units at $1000 each
    • Item X-SET x 10 units at $2000 each 
  • The shipping agent (supplier) called SAFMARINE is handling the importation of the goods and has also submitted a separate supplier invoice to be
    • Transport costs: R2000 (Taxable)
    • Handling, Administration and Insurance Fees: R500 (Taxable)
    • Import Duties: R150 (amount can be claimed back from local Tax Authority)

Apply the following steps to achieve the above:

1. If not yet in existence, setup a 100% Tax Type as below:

  • Go to Tax | Maintenance | Tax Types and click the Add button on the top of the grid.
  • Set the Tax Rate % as 100%

2. Create the following two suppliers to be used for these transactions:

  • MACS trading in US Dollar 
  • SAFMARINE trading in your local country currency e.g. SA Rand

3. Capture a new Goods Received Voucher for supplier MACS with the transaction lines below. Use Tax Type 3 = Zero Rate


4. Also note the above entered Tax Type should be a Zero% rated tax type, and is usually selected on the Inventory | Maintenance | Inventory Defaults | Goods Received Voucher tab.

5. Select the Importation Split option.

6. Then notice the Add Cost column that is automatically displayed on the main transaction line. For now, keep these values zero.

7. Now click the Split Allocation option.

8. Notice the Additional Supplier Costs screen that has now opened.

9. On the top of the screen, keep the selection on Additional Cost per Line.

10. Enter the values below. Also notice the 2 different tax types used in this case.

11. Notice the above Tax Amount value of R150 on the third line that can be manually captured in accordance to the actual Import Duties value.

12. Also, in this case the Tax Type used on the third line = 11 (Other Goods Imported)

13. At the bottom right of the screen notice the Difference amount below. For now, don’t change anything further and simply click the OK button.

14. Back on the main transaction screen, enter the Add Cost values on the two lines according to how you want to allocate the full complement of R2500 (total of the Difference amount in step 13 above) in total.

15. When done, process the Supplier Invoice. Notice the details marked below if separating GRV from Supplier Invoice.

16. Also notice the same details on the printed Supplier Invoice.

17. If you now go back to the archived SINV, notice the Difference value below which is now zero. This is because the full complement of R2500 has been allocated on the Add Cost column on the main transactions screen in step 13 above.

18. Now go to Tax | Reports | Tax Listing

19. Setup the report as below: Show Transactions option selected and select the Period/Date range to include the SINV transaction date.

20. The Tax Report should correctly reflect the Import Duties VAT (Tax Type 11) that can be claimed back from your local Tax Authority, in addition to the Tax Type 1 transactions.

Also notice the other Tax Type 3 transactions as used on the main SINV transactions screen (refer to Step 3 above).

21. Finally, also note that the full amount of R150 has been debited on the VAT Control Account (in addition to the Tax Type 1 transactions), thereby reducing your liability on payable VAT to the local Tax Authority.