How New Car Taxes Drive up SA Vehicle Prices
Taxes contribute substantially to new-vehicle prices. Rising production and shipping costs – plus a weak exchange rate – make cars more expensive, but they’re not the only reasons. A significant portion of the cost of a new car is due to the taxes applied to it!
“Two things in life are certain: death and taxes.” Benjamin Franklin wrote that in 1789, and the debate continues both locally and internationally about how these taxes are used.
If we received a monetary tip every time someone commented on our new-car content, saying new cars “are overpriced” or “too expensive,” we might all afford to retire early.
Inflation is a fact of life and unavoidable, but taxes and duties on vehicles, which consumers ultimately pay, are a major factor in the cost of new cars.
Other costs are also built into the showroom price (a topic for another day), but this article focuses purely on the taxes and duties that influence new-car prices in South Africa.
New Car Taxes in South Africa
Several taxes affect the purchase price of new vehicles. These include:
- Value Added Tax (VAT)
- Import duties
- Ad valorem excise duty (luxury tax)
- Carbon tax (for internal-combustion engine vehicles)
- Tyre levy
There are also operational taxes such as the Road Accident Fund (part of the fuel levy) and licensing fees, but this article focuses only on the purchase-related taxes paid upfront when buying a new car.
New car taxes summary
| Tax/Duty | Rate/Application | Applies to EVs? | Notes |
|---|---|---|---|
| VAT | 15% on ATV (Customs Value + 10% + Duties) | Yes | Applied to the total value, including duties. |
| Import Duty | 25% standard; 18% EU; 0% SADC | Yes | Higher for EVs than some ICE vehicles; rebates possible under APDP2 via export credits. |
| Ad Valorem | 0.75–30% based on price (starts ~R250,000) | Yes | Luxury tax; rates increase with vehicle price. Threshold has not kept pace with inflation. |
| Carbon Tax | R146/g CO₂/km (passenger >95g); R195/g CO₂/km (double-cabs >175g) | No | EVs are exempt from this emissions-based levy. |
| Tyre Levy | R2.30/kg | Yes | Environmental levy on new tyres. |
| Customs/Port Fees | Variable (hundreds to thousands of rands) | Yes | Additional costs related to import processing. |
Value Added Tax (VAT)
Value Added Tax (VAT) is a consumption tax charged at 15% in South Africa. For imported vehicles, VAT is not simply applied to the invoice value. Instead, it is calculated on what is known as the Added Tax Value (ATV) to ensure that importers cannot undervalue vehicles to reduce tax liability.
The Added Tax Value (ATV) forms the base for VAT calculation and is determined by adding the following components:
- Customs Value of the vehicle: The Free on Board (FOB) value of the vehicle as assessed by customs authorities.
- A 10% uplift (markup) on the Customs Value: Applied to vehicles imported from outside the Southern African Customs Union (SACU).
- Any Total Non-Rebated Duties: Includes import duty and other specific vehicle taxes that must be included before VAT is calculated.
How to calculate the VAT Payable on a new imported vehicle:
First, calculate the Added Tax Value (ATV):
ATV = Customs Value + (10% × Customs Value) + Total Non-Rebated Duties
Then, calculate the VAT Payable using the standard 15% rate:
VAT Payable = ATV × 15%
Example Calculation:
For a vehicle with a Customs Value of R300 000, and assuming an import duty of 25%, which makes the Total Non-Rebated Duties R75 000 for this particular example:
- Calculate Added Tax Value (ATV): R300 000 + (10% × R300 000 ) + R75 000 = R405 000
- Calculate VAT Payable: 15% of R405 000 = R60 750
Therefore, for this example, the VAT Payable would be R60 750.
Import Duty
Import duty is a tax applied to the CIF value (Cost, Insurance, and Freight) of the vehicle. It is intended both to protect local manufacturing and to generate revenue for the state.
The standard rates are:
- Passenger cars and SUVs: 25%
- EU origin: 18% (through trade agreements)
- SADC origin: 0% (if local content requirements are met)
- Commercial vehicles: 20% (12% if imported from the EU)
- Electric Vehicles (EVs): 25% currently. (While there have been proposals to reduce this to around 18%, these have not yet been implemented.)
Certain automotive manufacturers may qualify for rebates through the Automotive Production Development Programme (APDP2). These rebates – often referred to as export credits – can reduce the effective import duty rate to between 5% and 10%.
However, these savings are typically reflected indirectly in final pricing and may not always be passed on in full to the consumer.
How to calculate Import Duty on a new imported vehicle:
Scenario: A passenger vehicle with a CIF value of R300 000, imported from outside the EU or SADC.
Import Duty = 25% × R300 000
Therefore, R75 000 is included in the Added Tax Value (ATV) when calculating VAT.
Ad Valorem Excise Duty (Luxury Tax)
The Ad Valorem excise duty (also called the luxury tax) is applied to vehicles deemed non-essential or luxury items. It is calculated based on the vehicle’s recommended retail price (excluding VAT, and less 20%).
This tax is progressive, meaning higher-priced vehicles are taxed at higher rates. The rate ranges from 0.75% up to a maximum of 30%.
A key point is that the R250 000 threshold, above which this tax applies, has not been adjusted for inflation. As a result, even relatively affordable vehicles can be subject to this luxury tax.
Ad Valorem Duty Formula:
Rate (%) = [(0.00003 × A) – 0.75], where A = Retail price (excl. VAT) minus 20%
Example: For a vehicle with a recommended retail price of R900 000 (excl. VAT):
Calculate A = R900 000 – (20% × R900 000) = R720 000
Calculate Ad Valorem rate = [(0.00003 × R720 000) – 0.75]% = [21.6 – 0.75]% = 20.85%
Calculate Ad Valorem duty = R900 000 × 20.85% = R187 650.
In this example, the ad valorem duty payable would be R187 650.
Carbon Tax
The Carbon Tax is an environmental levy applied to new internal-combustion engine (ICE) vehicles based on their CO₂ emissions. The purpose is to encourage manufacturers and consumers to choose more fuel-efficient, lower-emission vehicles and to support efforts to reduce greenhouse gas emissions.
It applies to both locally manufactured and imported ICE vehicles. Note, however, that Electric Vehicles (EVs) and most petrol-electric hybrid derivatives are exempt from Carbon Tax.
Carbon Tax rates for cars and double-cabs:
- Passenger vehicles: R146 per gram of CO₂/km above 95 g/km.
- Double-cab bakkies: R195 per gram of CO₂/km above 175 g/km.
Example Carbon Tax Calculation
Example Vehicle Emissions: 150 g CO₂/km (passenger vehicle).
Step 1: Determine taxable grams
150 – 95 = 55 g/km
Step 2: Calculate Carbon Tax
55 × R146 = R8 030
In this example, the carbon tax payable would be R8 030.
Tyre Levy
Yes, there’s a tax on new tyres. The tyre levy is an environmental charge designed to help fund the management and recycling of waste tyres. It is applied based on the weight of new tyres fitted to the vehicle.
Current Tyre Levy in South Africa:
- R2.30 per kilogram of tyre weight.
Example Tyre Levy Calculation
Example: A vehicle fitted with four new tyres weighing 10 kg each (total of 40 kg).
40 kg × R2.30 = R92
In this example, the tyre levy payable would be R92.
Customs / Port Fees
In addition to the formal taxes and levies, there are customs processing and port charges associated with importing vehicles.
These costs are variable and can range from hundreds to several thousand rands, depending on the shipment, handling fees, and logistics providers. While they are generally smaller relative to the other taxes described here, they still contribute to the final landed cost of an imported vehicle.
How much will you pay?
Understanding the individual taxes is helpful, but the real impact is seen when you add them all together. Below are illustrative worked examples showing how these taxes can accumulate on typical vehicles.
Example 1: Internal Combustion Engine (ICE) Vehicle
Assumed Retail Price: ~R500 000
Components:
- Import Duty (25%):
R500 000 × 25% = R125 000
- Ad Valorem Duty (approx. 20.85%):
~R104 250 (as calculated in the earlier example)
- VAT (15% on ATV):
~R91 375 (using the validated ATV formula with duties included)
- Carbon Tax:
~R8 000–R15 000 (depending on actual emissions)
- Tyre Levy:
~R100–R200 (based on tyre weight)
The Estimated Total Tax Burden is approximately R328 725–R335 825.
This can represent 65–67% of the retail price when all purchase taxes are included.
Example 2: Electric Vehicle (EV)
Assumed Retail Price: ~R700,000
Components:
- Import Duty (25%):
R700 000 × 25% = R175 000
- Ad Valorem Duty (approx. 17%):
~R119 000 (based on the validated formula)
- VAT (15% on ATV):
~R131 250 (with correct ATV calculation)
- Tyre Levy:
~R100–R200
Carbon Tax:
Not applicable (EVs are exempt).
The Estimated Total Tax Burden is approximately R425 350–R425 450.
This equates to roughly 61% of the retail price.
If you’re researching new or used vehicles, it helps to be aware of how these car taxes impact the final price. Understanding the full cost breakdown is one way to shop smarter, and plan your budget realistically when considering your next vehicle purchase.
Want to buy a new or used vehicle? Browse cars for sale
Read all the latest motoring news and reviews
Disclaimer: While every effort has been made to ensure the accuracy of the tax rates, thresholds, and calculations in this article, these are based on the latest publicly available legislation and SARS guidance as of July 2025. Tax rates and regulations are subject to change. Readers are advised to consult the SARS website or professional advisors for the most current info before making purchasing decisions.