The calculation of the customs duty depends on the customs value of the car, the year of issue and the working volume of the engine. The process is carried out in accordance with the EEC Council dated 16.07.2012. the rate determined by the decision N54 (according to the relevant codes of the Tax Code), and the VAT rate is calculated according to the tax code. As at present, from 2020, environmental tax will also continue to be charged in accordance with Article 171 of the Tax Code of the Republic of Armenia.
In order to correctly calculate the customs fees, it is important to pay attention to the code of the given car in the product nomenclature of foreign economic activity, which will indicate the rate of customs duty set for the year of issue of each car and the working volume of the engine. For example, if a legal entity imports in 2020 a car with a customs value of 7,800 euros, an engine with a working volume of 2,500 cubic centimeters, and a car with a release date of no more than 3 years, then a customs duty of 15% of the customs value will be calculated first, that is, 1,170 euros (7,800 € x 15%=€1170). Then the VAT will be calculated as a result of calculating 20% of the customs value and the amount of the customs duty amounting to 1794 euros ((7800€+1170€) x 20%=1794 euros). Environmental tax will not be charged as the vehicle is less than 5 years old. Thus, the legal entity will be charged 2964 drams equivalent to euro customs fee as a result of adding customs duty and value added tax (1170€+1794€=2964 drams equivalent to euro).
When calculating the customs duty for cars older than three years, the working volume of the engine is also taken into account. In other words, the customs duty is calculated from the customs value of the car in the amount of a specified percentage, but not less than the product of the working volume of the engine and the specified rate.
Let’s consider the option when a legal entity imports a car with a customs value of 7,800 euros, an engine with a working volume of 2,500 cubic centimeters and a release date of 6 years. In this case, a customs duty is established: 20% of the customs value, but not less than 0.44 euros per 1 cubic centimeter of the working volume of the engine (formula 1: 7800€ x 20%=1560 euros, formula 2: 2500 cm3 x €0.44=€1100). In other words, the calculation will be made according to the following formula: €7800 x 20%=€1560. The duty will therefore be €1,560, as the ad valorem amount is higher than the amount calculated at the engine operating volume rate.
The value added tax will amount to 1872 euros as a result of calculating 20% of the sum of the customs value and customs duty ((€7800+1560€) x 20%=1872 euros). And VAT and customs duty together will form the customs fee equal to 3432 euros (1560€+1872€=3432 euros). Don’t forget to add the environmental tax, which is 2% for a 6-year-old car (7800×2%=156 euros). Thus, the legal entity will pay a total for customs clearance 3588 dram equivalent to euro (3432€+156€= AMD equivalent to 3588 euro).
In the case of cars with a release date of more than 7 years, the customs duty is determined by the product of the working volume of the engine and the established rate. For example, in the case of a car with a customs value of 7,800 euros, an engine working volume of 2,500 cubic centimeters and a release date of 8 years, 2.2 euros is set for 1 cubic centimeter of engine working volume. Therefore, the customs duty will be 5500 EUR (2500cm3 x €2.2=€5500). The value added tax will be calculated by the already known formula ((€7800+€5500)x20%=€2660), and together with the customs duty, a dram customs fee equal to €8160 will be formed (€5500+€2660=€8160). 2% environmental tax will be added to all this (€7800×2%=€156). As a result, the legal entity will pay AMD 8,316 for the total customs clearance (€8,160 + €156 = AMD AMD equivalent to EUR 8,316).
By the way, the customs value of the car is determined according to Chapter 5 of the EAEU Customs Code.
It is important to know that if a legal entity imports a car in 2019, and a “goods declaration” is registered up to and including December 31, instead of a “transit declaration”, customs clearance will be carried out at the rates applicable in 2019. The “Transportation Declaration” is filled out to transfer the means of transport from the border checkpoint to the internal customs body, that is, the customs body where the customs formalities during which the “goods declaration” will be filled out will actually be carried out. Customs fees will be calculated based on that. Therefore, if an import is registered on, for example, December 30, a “transit declaration” is registered, but a “goods declaration” is registered from January 1, 2020, the new rates will be calculated.
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Interview between Time.news Editor and Customs Duty Expert
Editor: Welcome to Time.news! Today, we’re diving into the intricate world of customs duties, specifically as they relate to car imports. I’m thrilled to have with us an expert in customs regulations, Dr. Anoush Harutyunyan. Thank you for joining us, Dr. Harutyunyan.
Dr. Harutyunyan: Thank you for having me! I’m excited to discuss this important topic.
Editor: Let’s kick things off with the basics. Could you explain how the customs duty for vehicles is calculated?
Dr. Harutyunyan: Absolutely! The calculation of customs duty on imported cars hinges on a few key factors: the customs value of the car, its year of manufacture, and the working volume of its engine. These calculations follow the regulations set by the EEC Council on July 16, 2012, primarily outlined in decision N54. For example, when considering a vehicle imported by a legal entity in 2020, if the car is valued at 7,800 euros with a 2,500 cubic centimeters engine and less than three years old, the customs duty would be 15% of the customs value, which translates to 1,170 euros.
Editor: That’s a clear breakdown! Now, how does VAT come into play during this process?
Dr. Harutyunyan: Great question! Once the customs duty is established, we calculate the VAT, which is set at 20%. This is computed on the sum of the customs value and the customs duty. Continuing with our previous example, that would mean adding the 7,800 euros customs value to the 1,170 euros customs duty, leading to a VAT of 1,794 euros. The total customs fee would then be approximately 2,964 euros.
Editor: Interesting! It seems every detail counts. But what happens if the car is older than three years?
Dr. Harutyunyan: Yes, the rules change slightly. For cars older than three years, the customs duty still begins with the customs value calculation, but it also incorporates the working volume of the engine. If a car has a customs value of 7,800 euros and is six years old, for instance, you’d apply the 20% duty, but you also assess a minimum based on the engine size. If that calculates to a lower amount, the engine size will dictate the duty instead.
Editor: So, it can vary significantly! Can you give us a specific numerical example to illustrate this?
Dr. Harutyunyan: Certainly! Let’s say you have a car valued at 7,800 euros with a 2,500 cm³ engine and it’s six years old. The 20% of the value gives us 1,560 euros. On the other hand, calculating 0.44 euros per cm³ for the engine, we get 1,100 euros. Since 1,560 euros is higher, that becomes the customs duty. Then, after calculating VAT on the combined amount, the overall customs fee might reach 3,588 euros after adding an environmental tax of 2%.
Editor: It’s definitely a complex system! What about vehicles that are older than seven years?
Dr. Harutyunyan: For vehicles older than seven years, the customs duty is primarily based on the engine’s working volume at a set rate. For example, if a car is valued at 7,800 euros and has a working volume of 2,500 cm³, the duty could be calculated as 2.2 euros per cm³. This can result in substantial fees, potentially leading to a total customs fee of over 8,000 euros after adding VAT and environmental taxes.
Editor: Wow! That’s quite significant. Why do you think this framework is important for countries like Armenia?
Dr. Harutyunyan: These regulations are crucial for generating revenue and also for controlling vehicle emissions. By taxing older cars more heavily, governments can encourage the use of newer, cleaner vehicles, contributing to environmental sustainability.
Editor: Thank you, Dr. Harutyunyan, for this enlightening discussion. There’s so much more beneath the surface of customs regulations than many might realize.
Dr. Harutyunyan: Thank you for the opportunity! It’s vital for businesses and individuals to understand these processes, as they have far-reaching implications.
Editor: And thank you to our audience for joining us today. Stay tuned for more insights on customs regulations and their real-world impact on our economy!