New cars in Belarus will become 15% more expensive

18 January, Minsk /Andrei Asfurа - BELTA/. The expected price increase for new cars in Belarus will be at least 15%. Prices in car dealerships will change from the moment of official publication of Decree No. 36, which provides for the cancellation of VAT benefits for the import and sale of imported vehicles by legal entities and individual entrepreneurs for commercial purposes. This was reported to BELTA correspondent by the Chairman of the Board of the Belarusian Automobile Association (BAA), Sergey Mikhnevich. The decree was signed by the head of state on January 17, and the auto business is currently awaiting its official publication. In the meantime, car dealers have stopped selling cars, as they do not know from what moment they will have to clear customs under the new rules. On average, car dealers expect to increase car prices by at least 15%. "It is difficult to say how much each car dealer will increase prices, as each model has its own profitability margin," explained the Chairman of the Board of the BAA. "In any case, this process will be influenced by the amount of VAT that was paid on the profit margin." According to him, Belarusian car dealers sold cars with a profit margin from 5% to 10%. So, for cars where the profit margin was 10%, the price increase will be lower, as VAT was paid on a larger amount. In this case, it is necessary to consider not only the base cost of the car, but also the cost of the configuration. The decree will lead to a procedural alignment of the legislation of the Customs Union countries. But in terms of figures, the interlocutor believes, this will not happen, as in Belarus the VAT rate is 20%, in Russia - 18%, in Kazakhstan - 12%. "If we talk about the prices of Russian importers, whose owners are mostly car manufacturers, then the purchase prices, due to this factor, as well as the scale of the market, are lower there than for Belarusian importers," emphasized Sergey Mikhnevich. Russian importers may take advantage of the moment to establish themselves in the Belarusian market. "But I don't think that Russian car importers will come to Belarus in the current situation," noted the expert. "If we cannot find arguments with manufacturers to reduce prices, our buyers will simply go to Russia and Kazakhstan."

The cancellation of the VAT exemption for legal entities will also affect the cost of used cars. Since July 1, when customs duties for individuals were raised, the import of foreign cars into Belarus has practically stopped. "However, some legal entities and individual entrepreneurs were importing and selling them in Belarus, benefiting from the VAT exemption, which resulted in maintained attractive prices for used cars for Belarusians and Russians," said Sergey Mikhnevich. At the same time, the Belarusian new car market in 2012 may see shifts towards reducing customs duties in connection with Russia's accession to the WTO. "We believe that in July, the customs duty for legal entities will be reduced," said the Chairman of the Board of the BAA. A decrease in the activity of importing used vehicles will also boost demand for new cars. The Decree abolishes the current procedure for determining the VAT tax base. If previously the taxable base was the difference between the sale price and the purchase price of a car, then from the moment the document is officially published, VAT will be calculated on the full cost of the foreign car. The previous procedure for determining the VAT tax base will be retained only when legal entities and individual entrepreneurs sell vehicles purchased from individuals within Belarus. This will allow car dealers to maintain their interest in developing the trade-in scheme (purchasing a used car as a down payment for a new foreign car) in Belarus. -0-

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