ERCA Announces Grace Period for Half Van Import Tax

Last week, the director general and his two deputies at the Ethiopian Revenues & Customs Authority (ERCA) decided a July 6, 2014 cut-off date for new tax rules on the importation of half vans. This step was taken due to the large number of people who had already imported such vehicles with the assumption that such tax was not applicable on them. This had been the case for many years, due to “the lack of technical knowledge” among the implementing staff of the ERCA

The categorisation of vehicles for tax purposes is conducted according to the World Customs Organisation’s (WCO) Harmonised System Code(HSC). Accordingly, the ERCA recognises two kinds of vans – full and half. The full vans have windows all the way to the back, which are fully covered with mirrors and have a sliding side window.  Half vans are those have windows on the first half and covered with steel plates towards the back. Also, according to Ephrem Mekonen, the ERCA’s communications head, the full van will accommodate 12 passengers and is predominantly used as paid public transport;  the half vans, with less than 10 seats, are used for purposes other than public transportation.

Half vans were always liable for excise tax, but this was never enacted until June 2014. The ERCA said, in a written response to Fortune, that the problem was related to interpreting the Harmonised System Code differently to the WCO, stating that as early as 2003, 11 years ago, it had informed the SGS Coordination Office and the Addis Abeba La Gare Customs Office of the correct classification of half vans.

There is no subjectivity in the classification of these vans, read the response, as the process was based on the WCO’s explanatory notes.

While the rules have never changed, however, the implementation would be delayed until a reminder from the ERCA’s Akaki and Adama branches shortly before June 2014 decision. These were the same branches that should have levied the excise tax on those vans.

“Our staff workers at branch offices had no technical knowledge about the issue and that is why the WCO code was not under implementation,” said Fikadu Bekele, tax valuation director at the Authority.

The June announcement, however, caused an uproar, which led to the establishment of a committee to look into the matter, Fikadu said.

The team affirmed that half vans were in the category of passenger vehicles for non-commercial passenger transport, which put them in the same category as station wagons, which were charged excise tax, according to Fekadu. This team also recommended exemption for those half vans bought before July 6, 2014.

The directors of the Authority made the decision official on Tuesday September 16, 2014, during a meeting with 24 importers.

Half van importers had only been paying 35pc customs, 10pc surtax, 15pc Value Added Tax (VAT) and three percent withholding tax up until June 2014. Now they will pay an additional tax based on their­ engine type, 30pc for lower level, 60pc for medium level and 100pc for high level engines, according to Fikadu.


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