Tax on luxury cars becomes effective in Ukraine as of July 1

Vehicle tax on the luxury cars with an engine capacity of more than three liters and produced not more than five years ago became effective in Ukraine as of July 1, 2015.

The tax, which is fixed at UAH 25,000 per vehicle, was introduced along with legislative amendments to the Tax Code, adopted by the Ukrainian parliament late in 2014.

According to the document, July 1 was the deadline for sending the notice of tax payment and relevant payment details to taxpayers and the tax is due to be paid within 60 days. In case of late payment, penalties and fines will be accrued.

In addition to imposing the tax on luxury cars, as of January 2015, Ukraine levied new excise duties on buses and trucks, converted vehicles, which were imported as commercial ones, and raised excise duty on imported passenger cars.

According to Ukrainian Finance Minister Natalie Jaresko, budget revenue from the payment of vehicle tax in 2015 is expected at UAH 400 million. The Finance Ministry estimates that 17,000 vehicles, or 1.3% of all the vehicles in Ukraine, will be subject to the vehicle tax.

The reaction of experts and car market operators to the proposed amendments to the Tax Code was widely negative. Thus, head of the Ukrainian Association of Automobile Importers and Dealers Oleh Nazarenko argues the government has not chosen proper criteria for taxation of luxury cars. In his view, the price of a vehicle or its capacity should have been the "luxury" criteria.

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