Revenue Law and Taxation (Duties, VAT, Excise)
Domain scope
Revenue Law and Taxation (Duties, VAT, Excise) tests the tax cascade at import and the rules that decide who remits what. Customs duty, excise and import VAT are distinct taxes with different bases, reliefs and accounting rules.
Core rules
- Customs duty is charged on the customs value at the rate for the classification; specific duties use quantity.
- Excise is often charged on quantity or value, and its base may include duty. Check the national rule.
- Import VAT is generally charged on customs value plus duty plus excise plus certain charges, then recovered through the trader's VAT return if input tax is deductible.
- Reliefs are tax-specific: a duty suspension does not automatically suspend VAT; excise warehousing suspends excise until release for consumption.
- Currency conversion uses the prescribed rate on the prescribed date.
Worked example
Assume CIF value 10,000, duty 10%, excise 20% on value plus duty, and VAT 20% on value plus duty plus excise. Duty = 1,000. Excise base = 11,000; excise = 2,200. VAT base = 13,200; VAT = 2,640. Total charged at import = 5,840. Reasoning: build each base in legal order; never apply VAT to CIF alone; state assumptions because rates vary.
Traps
- Applying VAT to the CIF value only, omitting duty and excise.
- Mixing percentage points with percentages when rates change.
- Assuming a customs duty relief also relieves VAT or excise.
- Using the invoice date rather than the prescribed conversion date.
- Forgetting that recoverable import VAT is a cash-flow item, not a final cost, for a taxable trader.