Cars over $2,250,000 will pay the "luxury" tax

NOVEMBER 18, 2020

Cars over $2,250,000 in retail price will start paying internal taxes, as of December 1, after the update of the tax base that the AFIP will make in the next few days. This implies that the 0km, from about u$s28,100 at today's exchange rate, will be reached by a 20% rate corresponding to the first scale of this tax.

Meanwhile, the second scale will have a tax surcharge of 35% based on models worth $4,150,000, or $51,000. This is due to the 8.93% adjustment corresponding to the July, August and September quarter that arises from the Wholesale Price Index System (SIPM) and will be in effect until the end of February. Until the end of November, the tax will be charged from approximately $2,040,000 in value to the public. It must be taken into account that, due to the manner in which the tax is applied, a 20% rate represents a 25% increase in the price, while a 35% rate increases the value by approximately 50%. This is why many models are "capped" just below the tax base to avoid suffering this surcharge. In the case of not being able to sustain them at that level, these cars are no longer marketed in practice since they are left out in front of the competition. Most of the models affected are imported, but some are also produced domestically. It is necessary to take into account that the most accessible 0km of the market have a price of $1 million so the strip that is exempted is very small and that makes them pay tribute to models of the medium segment.

This tax - considered a "luxury" tax - has been applied for years with different levels of intensity. It began to have relevance during the government of Cristina Fernández de Kirchner, was raised to a record level in 2014, was reduced -despite the fact that it had been announced that it would be eliminated- during the presidency of Mauricio Macri and has had a greater impact since the arrival of Alberto Fernández. In fact, the way of calculation was modified (before it was due to general inflation, as established by the Cambiemos government) to move to a wholesale index.

Importers claim that the increase in the tax base that has been taking place in 2020 is not enough to cover the increase in inflation or the devaluation of the peso. According to their calculations, wholesale inflation is lagging behind the cost of living. In addition, the devaluation of the peso from January to September - which is the period that is being used to calculate the Internal Revenue Service - was 30%. "We are about 5% behind and we still have to calculate the days to reach December 1," complained one importer. It must be taken into account that almost all the models reached by this tax are governed by price lists in dollars. This means that more and more models will be reached. This policy of taxing the most expensive vehicles -mostly import ones- is in line with the government's plans to restrict the entry of vehicles from abroad due to the lack of dollars. Given the lower supply, overpricing, which is determined based on the law of supply and demand, became widespread. These values will be modified as of December and, during the remainder of this month, they will either not be sold due to a lack of stock or will wait for the new scale with adjusted prices to take effect

The value of the 0km reached by this tax, taking its sale price from factory or importer to dealer, goes from $1,451,300 to $1,580,935 for the first scale and from $2,679,323 to $2,917,700 for the second scale. To these amounts, VAT must be applied plus the commission margin of about 15%. Therefore, the final price is a guideline because it depends on whether or not the dealership resigns part of its profits. From that income, she has to face all the costs of the concessionaire (labor, rent, services, taxes and others). What remains is its profitability.

Source: Ámbito

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