R211 smartphone tax cut in South Africa

The South African government’s ad valorem duty exemption on low-end imported smartphones will reduce the cost of these devices by as much as R211, calculations by MyBroadband show.

The national 2025/2026 Budget Review includes a provision that smartphones valued below R2,500 be exempted from the 9% ad valorem normally applied to this goods category from 1 April 2025.

National Treasury said the adjustment would “enhance smartphone affordability at the lower end of the price spectrum and support efforts to promote digital inclusion for low-income households.”

The change came after heavy lobbying by communications and digital technologies minister Solly Malatsi and major mobile networks.

“One of my obsessions is looking at the declassification of smart devices as luxury items because they carry an additional tax,” Malatsi told MyBroadband in an interview in the early days of his appointment.

With a plan to transition away from 2G and 3G cellular technologies over the coming years, Vodacom, MTN, Telkom, and Cell C have highlighted the issue of 4G device affordability as a significant challenge.

MyBroadband’s recent comparisons have shown 4G smartphones currently start around R500 in South Africa. However, these devices are often partially subsidised by the operators.

To ensure they are able to get a good return on each device sold, the operators lock them to their networks for a year.

That means customers who want to use the devices must buy their airtime, data, minutes, and SMSs through just one network and cannot use any other SIM in that device.

South Africa has only one local smartphone assembler — Mobicel.

The vast majority of smartphones are imported from overseas and get slapped with 9% ad valorem duty.

Combined with other taxes, the effective tax rate on smartphones was 25.5% before the exemption.

Smartphones do not attract other import duties, so the only other tax that applies to their import cost is 15% VAT. However, the VAT is calculated on the value of the item plus 10%.

This figure is known as the added tax value (ATV) and applies to imports from all countries except Botswana, Lesotho, Namibia, and Swaziland.

The 9% ad valorem duty is calculated on the declared value of the goods rather than the ATV.

Therefore, the formula for calculating the import tax on all smartphones is as follows:

• Declared value + (Declared value x 1.1 x 0.15) + (0.09 x Declared value)

From April 2025, the ad valorem portion, which is calculated in the last bracket in the formula, will no longer apply if the declared value of the smartphone is below R2,500.

That means the effective tax rate on smartphones will drop to 16.5%, the same rate applied to electronics like laptops, headphones, internal computer parts, and digital cameras.

VAT hike puts a small dent in affordability

However, this will only last for a month, as the VAT on all goods and services will increase by 0.5 percentage points from May 2025.

Thereafter, VAT will be calculated as 15.5% on the ATV of the goods. That works out to an effective tax rate of 17.05% on smartphones valued under R2,500.

MyBroadband used the current and upcoming effective tax rates and applied it to smartphones with values varying from R250 to R2,499.

We found the biggest potential tax savings for a phone valued at R2,499 will be roughly R211.

A very low-priced device valued at R250 will cost R21 less to import.

The percentage saved will be roughly 6.7% across all devices priced below R2,500.

While this reduction is certainly welcome, its impact has been slightly offset by the VAT increase, which will climb by another 0.5 percentage points in the 2026/2027 financial year.

The table below compares the total cost of importing smartphones under R2,500 before and after the ad valorem exemption.