Nazar Bondar’s used 2004 Toyota Avensis cost him some $1,500. Why so cheap? Bondar acquired it via a Lithuanian firm and now drives it in Ukraine, without having paid customs charges.
“I paid an extra $700 to the people who brought it to Ukraine, and that’s it,” Bondar explains. “The Customs Service workers told me I’d have to pay an extra $3,500 to clear it.”
Bondar says he would gladly register his car in Ukraine, if the price were lower. And many other Ukrainians are doing what he did – leasing cars legally owned by firms in the EU for several thousand euros. The de facto owners then use the cars in Ukraine.
That way, they don’t have to pay for customs clearance of the vehicle, which they would do if they were importing a used car by themselves. The extra charges are an import tax of 10 percent of the vehicle’s value, 20 percent VAT, and excise duty calculated according to the vehicle’s engine cylinder capacity.
According to the State Fiscal Service, there are at least 63,900 foreign-registered vehicles on the territory of Ukraine. In 2016, more than 712,000 cars with foreign license plates crossed the border of Ukraine, of which at least 54,300 never left the country. While foreigners can bring their foreign-licensed cars into Ukraine for up to a year, Ukrainians are supposed to register such cars within 10 days – or take them back out of the country.
Protests
Kyiv’s central streets were choked with traffic on Sept. 6, as protesters who drive cars with foreign registration plates from Lithuania, Poland, and Slovakia rallied in front of Ukraine’s parliament, the Verkhovna Rada, demanding that lawmakers ease the rules for importing foreign-registered cars.
The protesters wanted cuts in excise duties and taxes for used European cars, which can add up to double the value of the car itself.
They were also protesting against proposals to introduce a new fine of up to 100 percent of the value of the car if Ukrainians drive cars with foreign license plates in Ukraine for more than 10 days without re-registering them. The vehicle would also be confiscated.
Currently, this violation is rarely punished, and the fine is only $325.
The protesters want parliament to pass a bill – which was registered in late December 2016 and is currently languishing in parliament’s tax and customs policy committee – on the transit and temporary import of cars with foreign license plates that are intended for personal use.
Oleg Yaroshevych, one of the organizers of the protest, says that customs clearance fee should be set at a maximum $500. Yaroshevych is the owner of a Facebook group called Auto Euro Power that has more than 45,000 members. Many of the protesters were members.
If backed by the parliament, the December 2016 bill would waive custom clearance charges for owners of imported vehicles with foreign license plates. Instead, they would pay an annual duty of about 2.5 percent of the cost of customs clearance in 2017. By 2019, the duty would rise to 6 percent, according to the bill.
Lawmakers say they aim to pass the bill in the next few months.
Nina Yuzhanina, the head of the Rada’s tax and customs policy committee, met with the protesters and said on Sept. 7 that customs clearance for vehicles with an engine cylinder capacity of up to 2.2 liters would cost some 1,000 euros for all cars produced after 2000.
As of now, only Euro-5-compliant vehicles can be registered in Ukraine, meaning that all cars produced before 2010 can’t be registered – no matter how good their condition is.
Crime and punishment
Meanwhile, the law caught up with one driver of a foreign-licensed car who failed to pay customs clearance fees. In one of the first rulings of its kind, a court in December 2016 ruled that a car owner should pay a fine of 300 percent of the customs duty due (Hr 400,000 or $15,382). The car owner lodged an appeal, but the court rejected it. The car was eventually confiscated.
Cases like that make Anastasia, a mother of two, very nervous.
She asked to be identified only by her first name, as she’s afraid of being prosecuted too for driving a car with foreign registration plates over the 10-day limit. She said she would be OK with paying the proposed annual duty of about 1,000 euros.
Anastasia bought a car in 2016 with the help of a friend. According to her, the friend has a company in Lithuania that leases cars. She was looking for a Ford Focus at first, but couldn’t find one in good enough condition, so she opted for a 7-seater Opel family car.
“I could afford either (a Ukrainian-made) Lanos or the ‘Lithuaninan,’” she said, referring to the Opel, which has Lithuanian license plates.
Organizing the purchase only took her a couple of weeks, and was less stressful than driving the car in Ukraine.
“Driving is a constant stress for me now,” she says. “I’m really afraid of a fine.”
In fact, there is a couple of ways to buy a cheap used European car for use in Ukraine, says Taras Guk, a lawyer and an expert at Law Enforcement Agencies Development office, a Kyiv-based think-tank.
“The buyer can either bring the car into the country themselves, or get a third party to bring it, or a foreigner can bring the car into Ukraine (and then sell it),” Guk says.
“In any case, all those who buy cars with foreign registration plates are not their (legal) owners and couldn’t become them. The person who drives such a car only has the right to use the vehicle,” Guk explains.
Guk said that the only way to avoid such problems is not to buy cars using shady schemes.
Despite the fact that almost 50,000 new cars were purchased and registered in Ukraine in 2017, according to the Ukrainian Motor Vehicle Manufacturers Association, experts believe the importing of used European cars is continuing to depress sales at the low end of the car market.
And Bondar says that until the customs charges are lowered, Ukrainians like him will continue to buy used cars from abroad instead of vehicles made in Ukraine, and they won’t be discouraged by “scary stories” about fines.
“Even though I’d love to drive a car with Ukrainian plates, I can’t, because the country didn’t create normal conditions for buying a car. All I want is the country not to steal what’s mine,” Bondar says.
“I don’t think that we’re traitors because we decided to buy a vehicle for $5,000 rather than $30,000. In my opinion, I didn’t violate the law.”
