Rules for importing cars changing again in Ukraine

Author : Olena Holubeva

Source : 112 Ukraine

The rules for importing cars may again change in Ukraine. In particular, we mean approaches to mandatory payments for customs clearance. On July 9, the Verkhovna Rada Committee on Finance, Tax and Customs Policy considered Bill No. 3704, which provides for changes to the current rules of the game, which have already undergone dramatic changes in 2018. The new bill, in particular, provides for the abolition of excise duty
23:27, 14 July 2020


The authors of the document are sure that the implementation of the proposed norms will finally solve the problem of EU number plates, putting an end to the story with loud protests and street blocking by car owners traveling with foreign numbers. However, it can already be said with certainty that the life of the document in the Parliament will not be easy - it raises serious objections among market participants: they say that radically changing the "rules of the game" is annually harmful to the investment climate. In addition, according to them, in relation to those who honestly cleared their cars, having paid all taxes and fees, it is unfair to give new exemptions and benefits to the owners of EU numbers.

Another bill No. 3704-1 was registered in the Rada, proposing an alternative approach to changing the rules: maintaining the excise tax and duty with fixing at the same level. But this bill may lead to an increase in mandatory payments for car registration in Ukraine and the rise in the price of new cars by 1-1.5 thousand euros.

How cars are cleared in Ukraine and why it doesn’t suit the owners of EU numbers?

In Ukraine, legislation has long been in force, according to which importing used cars into a country was practically inexpedient. Due to the high excise tax, a Ukrainian who wanted to buy a used car in Europe or the USA had to pay 7–20 times higher excise taxes for cars under 5 years old than for a new one, and 10–28 times more if the car was more than 5 years old. This gave rise to schemes by which people began to circumvent the law. The country was flooded with cars on European numbers: non-cleared and unregistered in Ukraine. To avoid paying duties and excise taxes, such cars were imported either in the regime of temporary import or in transit mode. They are registered with European citizens or European companies and are transmitted to Ukrainians by proxy. According to various estimates, the total number of such cars in 2018 in Ukraine was estimated from 1 to 2 million.

The state didn’t particularly obstruct the gray schemes: in violation of the import rules, the owners of EU numbers calmly drove along the streets, no one fined them. As you know, a lot of drivers on non-cleared cars now work unhindered in taxi services. Official dealers who complied with all the rules suffered from a large-scale scheme: they lost sales of their cars. As a result, the number of cars on Ukrainian roads grew, and budget revenues did not increase. In 2018, the Verkhovna Rada adopted a bill that was supposed to put an end to the automobile bacchanalia. The document has changed the excise tax calculation system. If before its adoption there were a lot of rates that had to be multiplied by cubic centimeters of the engine, the provisions of the new law approved only four rates and a formula that takes into account the cubic capacity of the engine and the age of the car. The excise tax is tied to the age of the car.

The law also provided a 90-day grace period, during which the excise for those wishing to legalize the EU car was twice cheaper. “However, while the Cabinet of Ministers adopted the so-called order of the bill, there were only 34 days left (from the grace period during which the 50% discount was valid). During this time, 200 000 cars were cleared in Ukraine - 140 thousand of them are those which were imported immediately after the law entered into force," Oleg Yaroshevich, head of the AvtoEuroSyla public organization explained to

In 2018, after the approval of new approaches to excise taxes, Yaroshevich defiantly burned his 2008 Land Rover with Euro numbers. He posted the video to the network. Thus, the head of the public organization expressed his disagreement with the fact that in accordance with the new legislation the legalization of a car would cost him 100% of the purchase amount. According to the new rules, any car produced in 2017-2018 in Ukraine was cleared for 40% of the cost, and any car manufactured in the beginning of 2000 with a price of 2-3 thousand euros will be cleared with a rate of about 200% of the cost. For Renault Laguna 2003 release, 2.2, diesel, for example, you need to pay about 3 000 euros, and such a car costs about 1.5 thousand euros.

Related: Ministry of Internal Affairs records increase in electric cars by 56% in Ukraine

The 50% discount on customs clearance expired on February 22, 2019. Everyone who did not have time to meet the allotted time faced a choice: to pay the full price or to get rid of cars with foreign numbers. In the package with changing the rules for making mandatory payments when importing a car, a bill was also enacted providing for an increase in fines for driving non-cleared cars, as well as toughening the responsibility for transferring such cars for use.

Since May 24, those who did not clear the EU number plate on time should pay a fine. The "green light" of the war against customs violators was given. But it received a serious rebuff: mass protests began. Therefore, at first, the parliament delayed the start of the application of sanctions by 90 days. Then the introduction of fines was postponed by the Cabinet of Ministers. It was announced that in mid-January the government will consider bills that would have to resolve the situation, within a month they should be adopted by the Rada. However, the resignation of Honcharuk happened, and the process slowed down.

Which rules of import will be changed?

According to the State Fiscal Service in November 2018, at the time of adoption of new legislation governing the customs clearance rules, 1.5 million cars of foreign registration were in Ukraine. After the adoption of new legislation, 550 thousand vehicles were exported outside the customs territory of Ukraine and destroyed.

On June 19, the Verkhovna Rada registered a draft law on amendments to the Tax Code with respect to the structure of excise tax No. 3704. A member of the committee on finance, tax and customs policy, Maryan Zablotsky coordinated the bill. He specified that the bill has already been agreed with the IMF, the Ministry of Finance, the State Customs Service, the Ministry of Transport and Infrastructure. AvtoEuroSyla supports bill No. 3704, so it "equalizes in rights those who can afford to buy an expensive car and, for example, a student who drives a used car from Poland: it doesn't matter if the car costs $ 100,000 or 1 000 - you need to pay 30% of the cost to the budget," Yaroshevich emphasized. The document is the final version of the compromise, which suits all the sides.

"No. 3704 will resolve many issues. It is aimed at supporting ordinary Ukrainians who would like to become car owners. I hope that this document will finally remove the problem of EU numbers from the agenda, creating acceptable conditions for customs clearance," said the co-author of the bill, MP (a member of the committee on finance, tax, and customs policy) Olexiy Ustenko.

The text of the document provides for exemption from the excise tax on the import of cars, trailers, semi-trailers, motorcycles, vehicles designed to transport 10 people or more. When vehicles of this category are customs cleared, no excise tax will be levied. The norm should come into force on January 1, 2020. “The excise tax as such - has been the main stumbling block for all the years, since it increases the cost of customs clearance tenfold. There will be only three payments - rich and poor pay the same tax - this is a duty of 10% and VAT - 20%. Thus, 30% of the cost of a car is paid from the import of both a new car and a used one, in spite of its value, as well as a 3% payment to the pension fund and 1.5% of revenues to the army budget.

Among other things, bill No. 3704 provides privileges for the import of vehicles to combatants, persons with disabilities, including as a result of the war.

The director of the All-Ukrainian Association of Automobile Importers and Dealers also called for being cautious with the rule on import privileges: "I am for benefits. I myself am a participant in the hostilities. But I believe that this rule needs to be supplemented so that the categories of citizens for whom the benefits are provided, they could use them only for their own needs. Otherwise, those in power can use this option as a loophole for importing luxury cars for personal purposes."

Related: Verkhovna Rada registers draft bills on production of electric cars



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