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Buying Autos With Foreign Number Plates: Risks and Benefits

11.10.2017

Stanislav Koptilin, lawyer at Ilyashev & Partners Law Firm

Source: Liga.net

Pros and cons of buying autos abroad

Ukraine has recently witnessed the sharp increase in importation of automobiles with foreign number plates (most frequently from Latvia, Lithuania, Slovakia and Poland). Internet web-sites are filled with a great number of advertisements placed by the companies which provide services (for a moderate price of EUR 800-1000) on selection, diagnostics and purchase of autos abroad, their delivery to Ukraine and preparation of the necessary documents.

In practice, there is a number of legal and half-legal schemes for using autos with foreign number plates in Ukraine. The most popular among them are: application of “transit” regime or “temporary importation” regime under the Istanbul Convention.

Scheme No. 1. «Transit» regime

Citizens of Ukraine have the right to import vehicles (for their personal use) which were registered outside Ukraine with the aim of their transit via customs territory of Ukraine and subject to their official registration in paper form (Article 381 (1) of the Customs Code of Ukraine).

To avoid settlement of customs duties in the process of importation of the automobile it is required to provide the document confirming its permanent registration by corresponding authorities of a foreign state.

The period of stay of such vehicles in Ukraine is limited to five years, and in case of transition in the area of activities of various customs points – to 10 days (Article 95 (1) of the Customs Code of Ukraine).

The amount of the fine for missing the mentioned deadline for not more than one day constitutes UAH 170.00, for no more than 10 days – UAH 3 400.00, and fore more than 10 days – UAH 8 500.00 (Article 470 of the Customs Code).

This scheme is quite popular in the cross-border regions of Ukraine, but is not very convenient. Every five days (ten days, at best) the owner of such vehicle must cross the state border. The advantage of such scheme is a very low price of an automobile with foreign number plates compared with the “custom-cleared” analogues.

Scheme No. 2. Regime of «Temporary importation»

The next popular scheme is importation of autos under the Istanbul Convention.

The Convention imposes an obligation onto every member state to allow temporary importation of goods (including vehicles) with the general provisional release from settlement of import duties and taxes.

Under such terms persons are allowed to import both commercial and private vehicles which must be registered outside Ukraine. At the same time commercial purpose vehicles must be imported and used by the persons performing their activities in the country of the vehicle’s registration, and the private autos – by the persons who permanently reside there.

In addition, the citizens of Ukraine have the right to use commercial vehicles at the territory of Ukraine if they had received a permit from a foreign person – owner of such vehicle. At the same time such Ukrainian citizen must carry out his activities for the benefit of the mentioned foreign subject.

From theory to practice

In practice such provision is implemented as follows: the citizen of Ukraine enters into the agreement with a foreign legal entity-owner which confirms that he performs activities for the benefit of such legal entity – non-resident and, in accordance with the package of documents available, uses the vehicle for commercial purposes at the territory of Ukraine.

Commercial use in this case means provision of commercial services on carriage of passengers or industrial, commercial or free transportation of commodities.

The main problem in the course of registration of temporary importation regime upon application of such scheme is to prove that the vehicles are imported with the exact purpose of their commercial use in the name and on behalf of the non-resident – owner of the vehicle. Very often customs authorities refuse to provide registration of the vehicle under temporary importation regime motivating their decision by the absence of evidence of importation of such vehicle for commercial purposes.

Conformation procedure

This must be confirmed: in case of commercial transportation services of people – by tickets accounting records; in case of commercial or free, industrial or trade-related transportation of commodities – by consignment delivery documentation, in particular, by international waybill (CMR-note). At the same time the driver who wants to bring a commercial vehicle to Ukraine must hold the documents confirming the performance by him of commercial activities for the benefit of the legal entity – owner (user) of such vehicle; the permit of the holder of the right for temporary importation of the vehicle; documents to the vehicle which confirm its registration in another state for the benefit of the person whose place of registration is outside Ukraine or who permanently resides outside Ukraine; documents to the vehicle confirming the purpose of its temporary importation; documents confirming commercial use of the vehicle (the Decision of the Supreme Administrative Court of Ukraine in the case No. ДО/800/37217/14 as of February 05, 2015).

Furthermore, the package of documents which confirms the fact of commercial use of such auto must affirm that such auto will not be used for making inland transportation. If such requirements are not met Ukraine will have the right to render its refusal in provision of the right for temporary importation or withdraw such permit.

Temporary importation for private persons

As far as the private vehicles are concerned, Ukraine may (but is not obliged to) allow exploitation of such vehicle to the person who permanently resides in Ukraine, especially is such person uses it on behalf of the foreign owner of the auto. However, such procedure has not been tuned in practical terms and, this is why, the possibility of its application is doubtful.

The term of temporary importation may not exceed three years and expires at the moment of termination of transportation operations. Information about the duration of transportation operations must be mentioned in the documents provided to the customs authorities.

The only advantage of application of the “Istanbulian scheme” is a very low price of the auto “with foreign number plates” compared with the “customs-cleared” automobiles.

Disadvantages of the “Istanbulian scheme” are as follows:

  • a Ukrainian citizen is not a legal owner of the auto with foreign number plates, but only its user;
  • the automobile must be taken outside Ukraine immediately after termination of the transportation operations for performance of which it was imported;
  • in case of violation of the terms of temporary importation the legal owner of the automobile is obliged to settle the sum of the tax liabilities and the fine (pursuant to the Article 105(2) of the Tax Code of Ukraine). In case of the dispute as for the security of such obligation the automobile may be placed under arrest;
  • the owner of the automobile may stop making the compulsory payments in the country from which the auto was imported, which may lead to negative consequences after expiration of the temporary importation period; the owner may also decline re-registration of the documents for the new term. As a result the user forfeits his rights to use the auto. It is not uncommon when the company-non-resident – the owner of the automobile – terminates its activities (or gets liquidated) after importation of the auto the Ukrainian territory which may result in experiencing great problems by the user when he wishes to bring it back to the country of registration of such auto.

Suchwise, the “Istanbulian scheme” has the right to exist, but of the main importance here is the package of documents submitted by the owner – non-resident to the Ukrainian user of the auto because it represents the basis (along with the properly completed customs declaration) on which the customs authorities take the decision on importation of auto to the territory of Ukraine under the “temporary importation” regime.

Other schemes

The list of “schemes” in Ukraine also includes:

  • temporary importation of automobiles to Ukraine by a foreign national with its subsequent transfer under control to the citizen of Ukraine;
  • receipt by the national of Ukraine of the citizenship of another state and “temporary importation” of the automobile with “foreign number plates” as by the citizen of the foreign state (pursuant to the Article 380(1) of the Customs Code of Ukraine). Such scheme is sometimes used in the regions near the state borders.

The legitimacy of such schemes is quite “doubtful” and “problematic”.

Operation – legalization

At the moment Ukrainian Parliament is reviewing a number of draft laws stipulating for legalization of importation and use by Ukrainians of autos with foreign number plates.

In particular, one of the draft laws envisages permission of temporary importation of private autos by private individuals for the period of up to one year subject to provision of a written obligation about their exportation and subject to written certification of importation. At the same time it is proposed to partially release the vehicles with age over seven years from settlement of customs duties and impose monthly settlement of 0.3% of the sum of standard customs duties. Ukrainians will be allowed to import only one vehicle for private use which will be partially released from settlement of customs duties. After exportation of the earlier imported vehicle importation of another auto will be allowed.

If adopted these amendments to the legislation will result not only in legalization of autos with foreign number plates in Ukraine, but will increase budget revenues as soon as the users of such vehicles will step out of the shadows and will start making official payments.

 
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