Exposing the trick of “reduced” automobile import prices

Being stunned by supercar “Maybach” with the cost of only a few hundred million VND

At the beginning of 2016, the Customs Department of HaiPhongreceived anautomobile import declarationwith non-commercial purpose ("gift"). The imported object is a Mercedes Benz S500 Maybach car with 4 seats, capacity of 4,663 cc petrol engine, brand new car, produced in 2015, German origin. It is considered as one of the most expensive supercars in the domestic market at present.

The surprise is that this supercar, which was being offered for sale on the Internet for about ten billion VND, was declared to import with the price of$US 20,000, equivalent to about 440 million VND (with the exchange rate of 22,500 VND/USD). Taxes on this car with the original price from the enterprise’s declaration were as follows: Import tax was $US 14,000 (tax rate was 70%), equivalent to more than 310 million VND; Special Consumption tax was $US 20,400, equivalent to 454 million VND (tax rate was 60% before July 1st, 2016); Value-added tax was$US 5,440 (tax rate was 10%), equivalent to 121 million VND. The total taxable value of this car was 875 million VND. Thus, the price of this Mercedes Benz S500Maybach supercar, including taxes declared by the company, was just over 1.3 billion VND, which was much lower than the price offered in the market.

Facing the unusually low declaration of the enterprise, the Customs Department of HaiPhongrejected the declared price and implementedprofessional measures, requested the enterprise to declare the adjusted price of this supercar which is $US 98,352, 5 times the original price. This price adjustment increased the tax value by billions VND. Specifically, according to the new price, Import tax was $US 68,846, equivalent to more than 1.53 billion VND; Special Consumption tax was nearly $US 100,320, equivalent to 2.232 billion VND; Value-added tax was nearly $US 26,752, equivalent to over 595 million VND. Thus, after the Customs Department requiredthe importer to declare the adjusted vehicle price, the total tax increased to nearly $US 196,000, equivalent to 4.36 billion VND.

If the Customs Department of HaiPhong hadnot detected this case andadjustedthe declared price, the State would have lost the total tax revenueof nearly 3.5 billion VNDfrom this Mercedes Benz S500 Maybach supercar.

In the past time, the Customs Department of HaiPhong also exposed many “reduced” price cases to evade tax for luxury cars. Typically, as in the case ofabrand new Toyota Land Cruiser VXS carwith 8 seats, produced in 2016, originating in Japan,capacity of 5,700cc; but the importer only declared the cost of$US 15,000. However, by using a database system, the Customs Department determined the car is priced at $US 68,006(4 times higher than the price declared by the enterprise).

Another case is the importing of brand new Mercedes Benz V220d Extra Long cars with 6 seats, German origin, produced in 2015, capacity of 2,143 cc. This car was declared the price of $US 25,000 /vehicle, but the Customs Department determined the actual price of this car was $US 40,300.

According to the Customs Department of HaiPhong, many “reduced” automobile import price cases in the past time were declared as non-commercial purposes (mostly as “gift”).

According to the Export-Import Tax Division (the Customs Departments of HaiPhong), updating from the beginning of the year until the end of July 2016, by the work of preventing the tax loss in price, the Customs Departments of HaiPhong collected and paid into the State budget nearly 102 billion VND. In particular, the value collected from post-clearance checks was44.15 billionvnd, from consultations in price is 57.54 billion VND. The most common goods violatingthe pricepolicy in the Customs Department of HaiPhongare passenger cars, trucks, wine, beer, etc. In particular, the proportion of rejecting after the declared value consultation for the wine and beer was up to 77.65%; truckswith 68.18%; cars with 33.74%.

“Reduced” price of one Land Rover car to evade hundreds of million VND tax value

According to another source of Customs News, the Customs Department of Ha Noi recently rejected the original declared prices of enterprises and requested the enterprises to declare adjusted prices for many luxury imported cars. If the Customs Department had not promptly detected and requested the enterprises to adjust the prices, the companies could have evaded hundreds of million VND tax value per car.

Specifically, in March 2016, an enterpriseimplemented administrative procedures at the Customs Department in Hanoi to import a Land Rover Range Rover Hybrid vehicle, United States origin. The enterprise declared the price of$US 30,540. For this price, the total value of the taxes that the enterprise must pay was$US 55,125, equivalent to 1.226 billion VND (70% import tax rate, 50% special consumption tax rate (the tax rate appliedbefore the Law on Special Consumption Tax taking effect, July 1st, 2016), and 10% value-added tax rate). When discovering the enterprise’s declared price was abnormally lowerthan other cars with the same brand and year of production, etc., the Customs Department had enough information and the legal basis to reject the declared value. After working with the Customs Department, the enterprise had declared the adjusted price for the car above is $US 47,000. For this new price, the value of tax the enterprise must pay was$US 84,835(nearly 1.9 billion VND), $US 29,710 difference. In this one case, if the Customs Departmenthad not promptly detectedthe abnormal declared price, nearly 700 million VND tax value would beenfrauded.

In fact, in the past time, a variety of cases that "reduced" prices of luxury imported cars as an attempt to evade tax were promptly detected and prevented by the Customs Department of Ha Noi. For example, in the case of the Land Rover Range Rover AutobiographyHy L car (German origin), the carwas declared at the price of$US 35,667, but the Customs Department requiredthe enterprise to adjust to the new price of $US 45,500($US 10,000difference), and the tax value differencewas up to hundreds of million VND. Or another case of a Toyota car was declared$US 15,500, but after working with the Customs Department, the enterprise must declare the price of$US 27,500, a difference of $US 12,000, equivalent to hundreds of million VND in taxes.

According to some experienced Customs officers, high-value,high tax rate, high frequency imported goods always havea high risk in "reduced" price for tax evasion.

In the Customs Department of Ho Chi Minh city, the problem of “reduced” automobile prices is also very difficult, especially for non-commercial purpose. The Deputy Head of Customs Branch of Saigon Port Area 3, Nguyen Dung said, many vehicle importers importing car for non-commercial purpose often declared very low prices. However, based on the actual imported price and price database from the Customs office, the Branch increased taxable value by several thousands USD per vehicle, accompanied by the tax value increased by hundreds of million VND.

Typically, on June 7th, 2016, T.T. Trade, Construction and Transport Limited Company imported a LEXUS RX350 F- SPORT AWD car with 5 seats, Canadian origin, produced in 2016, capacity of 3,500 cc. The enterprise declared the price of $US 38,000 USD. By physical inspection, the Branch adjusted the taxable price to$US 45,065. The tax value increased 261 million VND. T.P. Construction and Sport Limited Company imported a TOYOTA SIENNA car with 7 seats, type LV, produced in 2015. The enterprise declared the price of $US 30,000. The Branch adjusted the taxable price to$US 38,400, which led to the increase in tax value of 310 million VND.

Or P.N. Investment Joint Stock Company created a non-commercial declaration to import a Toyota Prado TX-L car, capacity of 2,700cc, produced in 2015, the enterprise only declared the price of $US 22,500. After adjusting the price of this luxury car to$US 31,651 by the Customs Department, the enterprise accepted to pay more tax value of nearly 370 million VND. H.M Joint Stock Company also must pay 305 million VND more in taxes for the imported CADILLAC CTS LUXURY COLLECTION car with 5 seats, after the price is adjusted from $US 25,000 USD (original declared price) to $US 33,000.

The Deputy Head of Customs Branch of Saigon Port area 3 said, from the beginning of the year to August 15th, the Branch had determined the taxable prices for 28 import declarations with non-commercial purpose, adjusted to increase the tax value by 67 billion VND, which were mainly automobiles.