Russia to implement new tax for foreign-manufactured vehicles at WTO accession

The Russian Ministry of Industry and Trade has submitted a bill to the state Duma to implement a recycling tax on vehicles that are imported to Russia. The bill is currently passing the first reading and is expected to become law by August 1, 2012.

By accession to the World Trade Organization, Russia has committed to gradually lower customs tariffs on automobiles to a rate of 15 % during a transfer period of seven years. Currently, the customs tariff for new automobiles is 25 %.

According to the bill, a vehicle imported to the Russian Federation would be subject to a recycling tax, payable to the customs authorities when the vehicle is brought to the country, to cover for the vehicle’s future recycling costs. The recycling tax rate will be determined by the Russian government upon entry into force of the law. According to preliminary releases, the tax would be calculated by means of a benchmark tax amount, which is expected to be approximately RUR 20 000, and a multiplier specified for each type of vehicle.

In respect of new automobiles, the multiplier is expected to range from 0.5 to 3.6, depending on the engine size. The amount of recycling tax on new automobiles would thus range from RUR 10 000 to RUR 72 000 (approximately EUR 250 – 1800). The tax amount for commercial vehicles is expected to be between RUR 40 000 and RUR 600 000 (approximately EUR 1 000 – 15 000), depending on the weight (tonnage) of the vehicle.

It is worth noting that domestic manufacturers would not be required to pay the tax – instead, they would be required to guarantee recycling of sold cars. Foreign automobile manufacturers thus incur a significant new cost by virtue of the new law compared to domestic manufacturers.