A gazette notification has been issued under the signature of President Anura Kumara Dissanayake, in his capacity as Minister of Finance, lifting the import ban on private cars, electric cars, hybrid vehicles, motorcycles, and bicycles.
The decision was formalized through special regulations issued to the Controller of Imports and Exports. The import ban, initially imposed in 2020 due to the economic crisis, was gradually eased in phases. The first two phases allowed the import of vehicles used in the tourism industry, buses, vans, lorries, and double cabs, but restrictions on personal-use vehicles remained.
Under the new regulations, the import of all motor vehicles, including those for public transport, goods transport, and special purposes, is now permitted. The Ministry of Finance has specified that vehicles under 304 classification codes are allowed for personal use.
The new regulations, effective from February 1, 2025, permit the importation of various types of vehicles, including:
Cars and vans for personal use
Buses for public passenger transport
Goods transport vehicles
Special purpose vehicles
Threewheels, bicycles, and other non-motorized vehicles
However, the government has imposed nine conditions to regulate vehicle imports, aiming to protect foreign exchange reserves, prevent excessive stockpiling, and increase state revenue. The conditions have been imposed pertaining to importation of vehicles in view of encouraging revival of normal economic activities and safeguarding the economic stability of the country, while taking into account protecting foreign exchange reserves, discouraging importation of an excessive number of vehicles and keeping unnecessary stocks of motor vehicles and increasing fiscal revenue. Key conditions include:
A. Required number of vehicles can be imported by the importers registered with the Department of Motor Traffic and State Institutions subject to the Regulations imposed by the said Gazette Notifications.
B. Any importer other than the importer referred in the (i) above is permitted to import only one (01) vehicle within a period of twelve (12) months.
C. Any imported motor vehicle shall be registered with the Department of Motor Traffic in the name of the buyer (on instances when purchasing a motor vehicle from a registered importer) or in the name of importer within ninety (90) days from the date of Bill of Entry/ Customs Declaration (CUSDEC).
D. The importer or buyer shall submit an Affidavit including the Tax Payer Identification Number (TIN) issued by the Department of Inland Revenue along with other required documents to the Commissioner General of Department of Motor Traffic for the registration of motor vehicles.
Further, importers, other than the importers referred in the i) above, shall mention in the said Affidavit that they have not imported any other vehicle during a period of 12 months (from the date of the CUSDEC) after importing the first vehicle.
E. If it is failed to register any imported motor vehicle within 90 days by an importer, such importer shall be liable to pay a monthly late fee of 03% of the Cost-Insurance-Freight (CIF) value up to maximum cap of 45% CIF value, at the time of registration of motor vehicles at the Department of Motor Traffic.
F. No waiver pertaining to the payment of monthly late fee shall be granted under any circumstances.
G. When determining the age of the motor vehicle, the period between the Date of Manufacture and date of the Bill of Lading or Airway Bill of that motor vehicle shall be calculated.
H. It shall not be allowed for importation and Customs release of any motor vehicle using the motor vehicle import permits which have been issued with concessionary rates of duties.
I. If any motor vehicle is imported in violation of any prevailing Rules and Regulations, such motor vehicles (s) shall be re-exported by the respective importer within ninety (90) days from the date of the Bill of Entry/ CUSDEC.
Despite the lifting of restrictions, uncertainty remains over final vehicle prices due to the tax implications.
Luxury tax and new duties on vehicle imports announced
The government has clarified the tax structure on imported vehicles, addressing uncertainty regarding final prices.
Four main types of taxes will apply, with the luxury tax being the most significant. Initially introduced in 2015 and revised in 2019, this tax was in place in 2020, but no vehicles were imported under it. This will be the first time vehicles enter the country under the revised luxury tax system.
The luxury tax applies to vehicles valued at over Rs. 5 million, with a maximum tax rate of 120%. Additionally, the CC tax, or production tax based on engine capacity, will also be levied, with rates varying by vehicle type.
Customs duties, which were previously exempted for certain vehicle categories in 2023, have now been reinstated under the Customs Duty Exemption Ordinance. A 50% surcharge has been added to the existing 20% duty on the cost, insurance, and freight (CIF) value of vehicles, effectively increasing the duty to 30% for the upcoming year.
A special gazette notification was issued yesterday formalizing these changes. Additionally, with the lifting of vehicle import restrictions, an 18% VAT will now apply to imported vehicles, marking the return of this tax after several years.
The decision was formalized through special regulations issued to the Controller of Imports and Exports. The import ban, initially imposed in 2020 due to the economic crisis, was gradually eased in phases. The first two phases allowed the import of vehicles used in the tourism industry, buses, vans, lorries, and double cabs, but restrictions on personal-use vehicles remained.
Under the new regulations, the import of all motor vehicles, including those for public transport, goods transport, and special purposes, is now permitted. The Ministry of Finance has specified that vehicles under 304 classification codes are allowed for personal use.
The new regulations, effective from February 1, 2025, permit the importation of various types of vehicles, including:
Cars and vans for personal use
Buses for public passenger transport
Goods transport vehicles
Special purpose vehicles
Threewheels, bicycles, and other non-motorized vehicles
However, the government has imposed nine conditions to regulate vehicle imports, aiming to protect foreign exchange reserves, prevent excessive stockpiling, and increase state revenue. The conditions have been imposed pertaining to importation of vehicles in view of encouraging revival of normal economic activities and safeguarding the economic stability of the country, while taking into account protecting foreign exchange reserves, discouraging importation of an excessive number of vehicles and keeping unnecessary stocks of motor vehicles and increasing fiscal revenue. Key conditions include:
A. Required number of vehicles can be imported by the importers registered with the Department of Motor Traffic and State Institutions subject to the Regulations imposed by the said Gazette Notifications.
B. Any importer other than the importer referred in the (i) above is permitted to import only one (01) vehicle within a period of twelve (12) months.
C. Any imported motor vehicle shall be registered with the Department of Motor Traffic in the name of the buyer (on instances when purchasing a motor vehicle from a registered importer) or in the name of importer within ninety (90) days from the date of Bill of Entry/ Customs Declaration (CUSDEC).
D. The importer or buyer shall submit an Affidavit including the Tax Payer Identification Number (TIN) issued by the Department of Inland Revenue along with other required documents to the Commissioner General of Department of Motor Traffic for the registration of motor vehicles.
Further, importers, other than the importers referred in the i) above, shall mention in the said Affidavit that they have not imported any other vehicle during a period of 12 months (from the date of the CUSDEC) after importing the first vehicle.
E. If it is failed to register any imported motor vehicle within 90 days by an importer, such importer shall be liable to pay a monthly late fee of 03% of the Cost-Insurance-Freight (CIF) value up to maximum cap of 45% CIF value, at the time of registration of motor vehicles at the Department of Motor Traffic.
F. No waiver pertaining to the payment of monthly late fee shall be granted under any circumstances.
G. When determining the age of the motor vehicle, the period between the Date of Manufacture and date of the Bill of Lading or Airway Bill of that motor vehicle shall be calculated.
H. It shall not be allowed for importation and Customs release of any motor vehicle using the motor vehicle import permits which have been issued with concessionary rates of duties.
I. If any motor vehicle is imported in violation of any prevailing Rules and Regulations, such motor vehicles (s) shall be re-exported by the respective importer within ninety (90) days from the date of the Bill of Entry/ CUSDEC.
Despite the lifting of restrictions, uncertainty remains over final vehicle prices due to the tax implications.
Luxury tax and new duties on vehicle imports announced
The government has clarified the tax structure on imported vehicles, addressing uncertainty regarding final prices.
Four main types of taxes will apply, with the luxury tax being the most significant. Initially introduced in 2015 and revised in 2019, this tax was in place in 2020, but no vehicles were imported under it. This will be the first time vehicles enter the country under the revised luxury tax system.
The luxury tax applies to vehicles valued at over Rs. 5 million, with a maximum tax rate of 120%. Additionally, the CC tax, or production tax based on engine capacity, will also be levied, with rates varying by vehicle type.
Customs duties, which were previously exempted for certain vehicle categories in 2023, have now been reinstated under the Customs Duty Exemption Ordinance. A 50% surcharge has been added to the existing 20% duty on the cost, insurance, and freight (CIF) value of vehicles, effectively increasing the duty to 30% for the upcoming year.
A special gazette notification was issued yesterday formalizing these changes. Additionally, with the lifting of vehicle import restrictions, an 18% VAT will now apply to imported vehicles, marking the return of this tax after several years.
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