With the latest official average monthly salary in Ukraine reaching Hr 9,141, or $338, it’s quite unaffordable to get a new car.
This is why many Ukrainians have been eyeing and purchasing cheaper used cars that have been imported from the European Union. Right now Ukrainians can drive E.U. cars that they don’t officially own, dubbed as the “Euro-plate” car market.
Within this market, Ukrainians buy cheap used cars that remain legally owned by E.U. citizens or companies, meaning that Ukrainians can drive them but avoid high customs fees. Even under the most conservative estimates, there are at least 300,000 such cars in Ukraine. Car dealers – for whom the “Euro-plate” market has been a major competitor – say that such cars are typically older, polluters and can be unsafe.
But finding a compromise among authorities, “Euro-plate” car owners and dealers, Ukraine’s parliament approved two pieces of legislation in the first of three readings on July 13. If adopted, the new laws will reduce the cost of imported cars, change the legal time on how long an E.U. car can be present in the country, and establish more strict regulations on those who overstay.
Previously, activists of AutoEuroSila, a civil organization of car owners with European numbers, blocked some central streets in Kyiv for several days in a row to pressure the parliament to accept the draft legislation.
“We want to protect people and make legislation that will enable every Ukrainian to have an affordable car,” said Oleh Yaroshevych, head of AutoEuroSila, on his Facebook page on July 14.
According to Nina Yuzhanina, head of the parliamentary committee for tax and customs policy, it took about two years to accept the bills as a compromise solution between automobile dealers, authorities and the activists.
One of the main reasons of why lawmakers are accepting the bills is because “Euro-plate” owners are massively overstaying their legal time period and not paying taxes, according to Yuzhanina.
Of the 425,000 cars with foreign registration, nearly 60 percent of them have overstayed their legal period in Ukraine by the end of January, Myroslav Prodan, acting head of State Fiscal Service of Ukraine, said in a press release.
The Kyiv Post reached out to the SFSU regarding the specifics of imported cars data but did not get a response.
“These cars are not registered in Ukraine and taxes aren’t paid,” Prodan said. Meanwhile, in 2017, 80,500 new cars were imported officially and almost Hr 16 billion of customs taxes were paid to the budget, he said. “This is a significant amount that finances our infrastructure.”
Moreover, more than 10,000 car accidents occurred last year due to “Euro-plate” drivers, or six percent of total car accidents in the country, according to National Police.
However, it is more difficult to hold such drivers accountable if they weren’t caught on the spot due since the official owner is registered in the E.U.
Ukraine’s automobile expert Yevgeniy Mudzhyri said that it is will also be more difficult to fine “Euro-plate” drivers for violating traffic rules once the country installs traffic enforcement cameras.
“In this case, everyone understands that the owners of cars with Ukrainian registration will receive fines and penalties, and drivers with European numbers will not,” Mudzhyri told the Kyiv Post.
Excise tax
If the laws pass, it will be cheaper to register foreign used cars as the excise tax will be reduced and calculated using a special formula. The formula will take into account the age of the car, engine size, the base excise tax and a fixed 50 euro fee for a gasoline engine and a 75 euro fee for a diesel one.
Lawmakers are also planning to lift the ban on customs clearance of cars that do not comply with the EU’s Euro-5 environmental standards. But such cars will be taxed at a much higher rate.
For example, with the proposed legislation, the overall excise tax for a 3-year-old car with a 2,000-cubic-centimeter gasoline engine will be 300 euros. Today, the tax is 3,286 euros. But for a 15-year-old car with the same engine it will be five times higher, or 1,500 euros, but still much less than today’s 4,882 euros.
Car owners will still pay the value-added tax, import duty tax, and a separate fee to Ukraine’s Pension Fund. Together, it will be an additional 30 percent of the total cost of an imported car as it is today.
Penalties
But with lower overall taxes, the proposed legislation will significantly raise fines for those who violate the rules.
If someone drives a car with an EU license plate not registered under their name, the fine will be Hr 8,500. If they are caught again, the fine will doubled and they will not be allowed to drive in Ukraine for a year.
According to the proposed legislation, a car with foreign numbers needs to be registered within 10 days. Drivers who did not register their car within 20 days will pay Hr 85,000, or $3,150. If a car is not registered for more than a month the fine will be almost $6,300, or Hr 170,000 and the car will be confiscated.
The legislation will allow current owners of used E.U. cars to legally register their cars in Ukraine within six months.
