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. Last Updated: 07/27/2016

New Directive Imperils Duty-Free Car Imports

Are the days of duty-free imports of cars gone forever?

As every expatriate knows, cars can be imported into Russia on a temporary basis without payment of any import duties, VAT or excise taxes. While the importer has to give a commitment to re-export and while the penalties for failure to do so are extreme, this is a very useful relief -- particularly in the light of high import-tax rates, which average 90 percent of the value of the car. This benefit is available to accredited individuals as well as accredited representative offices of foreign legal entities.

But the honeymoon period could be coming to an end. A new directive has been recently issued by the State Customs Committee to regulate the procedure on temporary import of vehicles. This directive provides that customs shall ask for a "pledge," or deposit, of the full amount of the import taxes which would normally be due. This deposit is to be refunded once the car has been re-exported. We are, however, all too familiar with the difficulties of securing a repayment of any taxes in Russia.

This is not the only problem, however, as the directive also states that the entity importing the vehicle shall have to make payments of 3 percent per month of the total import taxes which would be due on a permanent import. These 3 percent monthly payments must be made in addition to the deposit referred to above. As such, if the car is here for say, three years, you could pay up to twice the amount of the import taxes. While these provisions were already contained in the relevant customs legislation, they were not previously applied in practice. The recent directive reminds customs to apply these rules, which they have now begun to do.

So is there any good news? For the moment the answer is "Yes," as the directive applies to representative offices and does not appear to apply to individuals. Therefore, temporary imports by individuals are still free from the deposit and the monthly payments -- but for how long? With the current pressures on the government to collect all possible taxes, it is likely that this rule will be extended to individuals in the near future.

As for vehicles which are already here on temporary import, the directive is silent in this area. It is, unfortunately, all too likely that when such temporary imports are up for renewal that customs may seek to impose this requirement. As such, it is now advisable to review the status of all your existing temporary imports, as well as reconsidering any vehicles which you intend to import in the future on this basis, and examine, with your professional advisors, what other options are available to you.

Alexander Dragunov is a manager in Price Waterhouse's customs group.