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The Herald
Zimbabwe: Partial Relief for Used Car Importers
Walter Muchinguri
10 February 2010
Harare — IMPORTERS of second-hand motor vehicles that had their duty reduced by 15 percent by Finance Minister Tendai Biti in his 2010 National Budget statement are not enjoying the full benefits of the reduction due to changes in the calculation of value added tax.
In addition to reducing duty for passenger motor vehicles of engine capacity not exceeding 1 500c and goods vehicles of a payload not exceeding 800kg from 40 percent to 25 percent with effect from January 1, the minister also made changes to the calculation of VAT.
The duty reduction was effective after the gazetting of Statutory Instrument 2 of 2010.
According to Zimra commissioner for legal and corporate services Ms Florence Jambwa, VAT is now calculated on the value for duty purposes plus the duty charged.
"Previously VAT on imported goods was calculated on value for duty purpose only which excluded duty. The effect is that it increases the amount of VAT payable," she said.
For instance, Zimra used to calculate value for duty purposes using the rate of duty, say 40 percent of the total cost of landing the vehicle at the border post that includes the cost of the vehicle, insurance and freight.
In addition, Zimra would also calculate 15 percent of the same landed cost and then combine the resultant figures from the two to establish the money payable by the importer to Zimra
For instance, if the landed cost of a vehicle is US$1 000 and previously when duty was charged at 40 percent, the duty would be US$400. In addition, VAT would be 15 percent of US$1 000 which is US$150
The total payable to Zimra was then US$550.
Under the new system Zimra uses the same calculation for duty and adds the resultant number to the landed cost and then uses the sum to calculate VAT.
Using the same example for a vehicle that is landed at US$1 000, Zimra now calculates 25 percent as duty which is US$250, then adds the amount to US$1 000 to come up with US$1 250.
They then calculate at 15 percent VAT on US$1 250 giving US$187,50.
The total duty payable becomes US$437,50.
So in essence where the importer of the US$1 000 vehicle used to pay US$550, they now have to pay US$437,50 giving a benefit of US$112,50.
Although duty for the specified vehicle was reduced to 25 percent, VAT remained unchanged at 15 percent.
Above the duty at 25 percent and VAT at 15 percent, importers still pay surtax, which has been retained at 15 percent.
However in instances where the motor vehicles whose duty has been reduced, and are more than five years old, a surtax of 25 percent is chargeable.
So effectively importers of affected vehicles have to pay 25 percent duty, 15 percent VAT, and 15 percent surtax if the vehicle that they are importing is under five years old, and 25 percent surtax if it is above five years.
A number of importers were left stranded early last month after they rushed to Beitbridge border post hoping to benefit from the reduced duty only to realise that they were still paying relatively higher charges.
Most Zimbabweans rely heavily on importing second-hand vehicles from neighbouring South Africa, Japan and Singapore, as they cannot afford new vehicles sold in the country.
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