When buying a BMW 3 Series in South Africa you pay a minimum CO2 emissions tax of over R6,000, and VAT of around R125,000 but this isn’t near the entire sum of taxes and levies that are included in the purchase price.
There are several taxes implemented when a new car is sold in the domestic market, which can be split into four main categories:
- Value Added Tax (VAT) – 15%
- Ad Valorem Tax – Calculated on a per-vehicle basis
- CO2 emissions tax – 2.5%-6%
- Import duties – 25% (18% if imported from EU)
Value Added Tax is an indirect tax on the consumption of goods and services in the economy, generating revenue for government which in turn is spent on service delivery.
Ad Valorem Tax is described as a luxury excise tax that exponentially increases with the price of the vehicle. It is an additional revenue stream for government derived from the sale of goods that are deemed luxuries rather than necessities, and levels the playing field between low and high-income individuals as the latter generally pays more Ad Valorem Tax.
Meanwhile, CO2 emissions tax which was implemented in 2010 increases with the amount of fuel a vehicle consumes. As per the South African Revenue Services, CO2 tax is “one of the government’s policy instruments to combat global warming by stimulating a low-carbon economy.”
Import duties then apply to most goods delivered to South Africa from other countries and are intended to protect local companies that may be competing in the same sector from predatory pricing practices.
Tax paid on a BMW 320d
We used the BMW 320d to determine how much taxes you really pay on a 3 Series as it is one of the most popular options in the catalogue, and it attracts the lowest CO2 tax since it runs on diesel.
The applicable VAT on the 320d is set at R125,397. Ad Valorem Tax comes in at approximately R155,621, while CO2 tax is R6,380.
Where the true value of all the surcharges becomes difficult to determine is with the import duties BMW must pay to bring its 3 Series to local roads.
The sedan is built in Germany meaning it only attracts import duties of 18%, however, this is levied on the price of the goods as purchased from the overseas market.
There is little available information that details what BMW South Africa pays its parent company for a unit of the 3 Series as it involves material costs, labour, research and development, and overhead expenses, the collective value of which is usually not divulged to the public.
Estimates suggest that the cost to produce a vehicle generally sits around 60% of its MSRP.
Hence, using this ratio, we can surmise that the local subsidiary likely pays BMW Germany around R577,000 for one 320d. Import duties on this amount work out to R103,860.
All tallied up, it’s estimated that around R391,259 (41%) of the 320d’s base price of R961,380 goes to taxes and levies.
It should be noted that this may not be the exact figure as we do not have all the necessary numbers to calculate it, but it will be in the ballpark of what you will pay in total taxes and levies on a luxury purchase such as a BMW 3 Series.
Naamsa, the Automotive Business Council, previously told TopAuto that: “The tax burden on consumers in South Africa is very high and Naamsa’s calculations show that the tax payable on a premium vehicle could be as high as 42% of the price of the vehicle, and on entry-level vehicles around 18%.”
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