Taxes And Import Duties On Vehicles Overseas

Singapore was dubbed the most expensive city in the world to live in last week by The Economist Intelligence Unit. That distinction is partly due to the fact that it’s extremely expensive to own a vehicle in this country. The cars themselves aren’t cheap, but it’s the cost of the right-to-own permit that really gets you. It can be as much as the cost of the already overpriced car.

I’m in the market for a new vehicle here in Panama. Cars in Panama are expensive relative to cars in the States but not as expensive as in Singapore. A lot of the cost has to do with import duties. Hyundai is a good example. A Hyundai Tucson costs in Panama about what it would cost in the States—because of an import duty exemption. However, import duties on most other cars in Panama, especially the luxury brands, make those vehicles 25% to 40% more expensive than they’d be in the United States.

Unfortunately for me, I don’t want a Tucson.

When we moved to Ireland, cars were much more expensive than I expected, more expensive even than in neighboring Britain. So I thought I’d just go to the UK, buy a car there, and bring it back to Ireland. As both were EU countries, I figured there would be no sales tax (VAT) issue.

As it turns out, it wasn’t only the VAT that Ireland imposed on the purchase of a car (which was 21% at the time compared with 17.5% in the UK) that made vehicles more expensive. Ireland also imposed a separate 17% car tax, in addition to the VAT. In fact, you had to pay the VAT on the 17% tax.

That kind of price discrepancy can create opportunity.

My mechanic in Panama is from Argentina. He told me this week about a friend of his who came to Panama to buy a brand-new Ford Explorer to ship back to Argentina. While I have lots of unanswered questions about the cost of shipping to Argentina and what taxes the guy will be liable for once the car arrives in that country, I’m led to understand that the savings on the purchase price more than outweigh the cost and time of the trip to Panama.

I don’t think this Argentinian plans to make a living exporting new cars from Panama to his country, but another friend in Panama knows someone who is making a business out of importing cars from the United States to Panama. This guy is buying “slightly damaged” vehicles at auction in the States and bringing them down four at a time in containers to Panama. Slightly damaged means they’ve been in fender benders. No structural damage and just bodywork required for the repairs.

This entrepreneur has figured out that he can have the repairs made in Panama for a fraction of what it’d cost in the States, so he’s buying the cars for steep discounts in the States because of the damage, having the damaged repaired at a discount in Panama, and then reselling the cars on the Panamanian market, which is used to paying a premium for imported vehicles.

Unfortunately, he’s focused on sedans, not SUV’s. Otherwise, I’d ask him to find something for me.

Lief Simon

“Lief, there is a small mistake in your article about the sales of apartments in the French castle in Limousin. As of Jan. 1, the French VAT has been upgraded to 20%. Of course the change is irrelevant in this case because the buyers won’t have to foot the bill.

“Thank you for all your information.”

A.C.

Ahh, right, the general VAT in France went from 19.6% to 20% Jan. 1, 2014.  However, you’re also correct that the VAT percentage doesn’t matter in this case as the buyer is exempted from paying VAT as long as he signs a rental agreement with the French Leaseback developer.