How to Calculate Luxury Tax

Dhaham · November 20, 2019

Anybody knows how to calculate luxury tax? Is it (CIF Value - 3,500,000.00) in case of petrol vehicles? For an example, if a CIF of certain vehicle is EUR 18,187, then on 20/11/2019, the selling rate of Euro is 201.8802

18,187 x 201.8802 = LKR 3,671,595

Therefore extra amount beyond 3,500,000 is LKR 171,595

Then luxury tax = 100% of extra amount = LKR 171,595

Is this calculation correct? Thanks in advance.

kush · November 22, 2019

Is this implemented in the first place

There are no formal announcement from either treasury or customs.

mikey · December 14, 2019

On 11/22/2019 at 2:29 AM, kush said:

Is this implemented in the first place

There are no formal announcement from either treasury or customs.

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Still not?

kush · December 15, 2019

http://www.customs.gov.lk/public/files/tariff/Luxary Tax on Motor Vehicle Effective From 01-11-2019.pdf

Edited December 15, 2019 by kush

mikey · December 15, 2019

On 12/15/2019 at 2:20 AM, kush said:

http://www.customs.gov.lk/public/files/tariff/Luxary Tax on Motor Vehicle Effective From 01-11-2019.pdf

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But why the prices hasn't changed much?

For example -

I was looking for Toyota CHR for permit few days ago. CIF of it is around 27 million yen (4.45 million rupees). So according to this new luxury tax should be around 1 million rupees.

So the total cost for this car,

CIF - Rs. 4.45 m

Luxury tax - Rs. 1 m

Import tax - Rs. 380,000 (for permit)

Total - Around Rs. 5.9 m

But when I asked from couple of importers, they all said for CHR (CIF 27 m yen) total cost would be around 5 million rupees for permit.

How is this possible? They said that the Luxury tax for this vehicle is around 75,000 rupees. I'm very confused. Can you please explain this?

priyanka · December 15, 2019

On 12/15/2019 at 12:25 PM, mikey said:

But why the prices hasn't changed much?

For example -

I was looking for Toyota CHR for permit few days ago. CIF of it is around 27 million yen (4.45 million rupees). So according to this new luxury tax should be around 1 million rupees.

So the total cost for this car,

CIF - Rs. 4.45 m

Luxury tax - Rs. 1 m

Import tax - Rs. 380,000 (for permit)

Total - Around Rs. 5.9 m

But when I asked from couple of importers, they all said for CHR (CIF 27 m yen) total cost would be around 5 million rupees for permit.

How is this possible? They said that the Luxury tax for this vehicle is around 75,000 rupees. I'm very confused. Can you please explain this?

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1. Do not believe those importers much, they are like politicians... will tell fairy tales until they get their cut

2. the auction prices have go down slightly

3. They will undervalue the vehicle for the invoice... and the balance send as black money.. so it's only the customs value comes in to play...

4 according to my understanding the luxury tax for C-HR is over 300,000.... but i may be wrong

5. Be careful... there are no long term tax policies for the vehicles in this country

Edited December 15, 2019 by priyanka

mikey · December 16, 2019

On 12/15/2019 at 6:02 PM, priyanka said:

1. Do not believe those importers much, they are like politicians... will tell fairy tales until they get their cut

2. the auction prices have go down slightly

3. They will undervalue the vehicle for the invoice... and the balance send as black money.. so it's only the customs value comes in to play...

4 according to my understanding the luxury tax for C-HR is over 300,000.... but i may be wrong

5. Be careful... there are no long term tax policies for the vehicles in this country

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Yes. I think third one is the way they import. They undervalue the vehicle so that CIF is below the Luxury tax free threshold.

Surely, this is illegal, right?

Is this a safe option since all the importers seem to do that?

kush · December 16, 2019

On 12/16/2019 at 1:02 AM, mikey said:

Yes. I think third one is the way they import. They undervalue the vehicle so that CIF is below the Luxury tax free threshold.

Surely, this is illegal, right?

Is this a safe option since all the importers seem to do that?

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Issue with the permit is you will be the importer and the CIF will be decided by customs based on the market price in Japan. Your LC CIF is more than the valuation it will be based on the LC CIF.

Best is to get the customs valuation of the vehicle and compute the tax. As CHR is a common vehicle any clearing agent will be able clarify this.

JPY 2.7 Mn. on the CHR will include Tax in Japan, exporter charges etc. which are not taken for customs valuation. They generally go by the based price of the basic car which is also very much cheaper (this was how it was calculated previously, I may be wrong here). Plus you might get depreciation on the age of the vehicle.

mikey · December 16, 2019

On 12/16/2019 at 3:31 AM, kush said:

Issue with the permit is you will be the importer and the CIF will be decided by customs based on the market price in Japan. Your LC CIF is more than the valuation it will be based on the LC CIF.

Best is to get the customs valuation of the vehicle and compute the tax. As CHR is a common vehicle any clearing agent will be able clarify this.

JPY 2.7 Mn. on the CHR will include Tax in Japan, exporter charges etc. which are not taken for customs valuation. They generally go by the based price of the basic car which is also very much cheaper (this was how it was calculated previously, I may be wrong here). Plus you might get depreciation on the age of the vehicle.

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I don't understand. It clearly says that luxury tax is based on CIF. Right? Can you please explain this more?

kush · December 16, 2019

On 12/16/2019 at 7:44 AM, mikey said:

I don't understand. It clearly says that luxury tax is based on CIF. Right? Can you please explain this more?

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Importers understate the CIF by opening the LC for a lower value and remitting the balance through other unofficial modes.

To counter this customs will have their own valuation based on the car model and they will not go by the amount in your LC

vitz · February 10, 2020

On 12/16/2019 at 9:08 AM, kush said:

Importers understate the CIF by opening the LC for a lower value and remitting the balance through other unofficial modes.

To counter this customs will have their own valuation based on the car model and they will not go by the amount in your LC

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Guys,

Thankful if one could share experienced-based information about the customs valuation of a Vezel RS (2019) and the luxury tax paid. Of course, this is under the prior assumption that the importer undervalues the CIF of the vehicle for 2 million yen.