Special 5 % excise duty on second hand cars announced

Finance minister Patrick Chinamasa has proposed a raft of new measures on excise duty on second hand motor vehicles in a bid to promote transparency in the determination of excise duty.

The measures are with effect from 1 January 2016.

Presenting the 2016 budget on Thursday, Chinamasa said  lack of transparency in the valuation of second hand motor vehicles for purposes of excise duty, has resulted in most buyers failing to or deferring transfer of ownership of motor vehicles.

"A special excise duty of 5% is levied on the assessed value of second-hand motor vehicles sold, transferred or otherwise disposed of to any person.

"However, high excise duty assessments and lack of transparency in the valuation of second hand motor vehicles for purposes of excise duty, has resulted in most buyers failing to or deferring transfer of ownership of motor vehicles."

He said second hand vehicles continued to account for a significant chunk of the import bill due to their affordability.

In July, Chinamasa proposed to increase surtax from 25 % to 35 % on second hand light passenger motor vehicles aged more than five years from the date of manufacture at the time of importation.

 That came into effect  from September 1.

Before the increase, second hand cars used to attract customs duty and surtax at rates of 40 %  and 25%, respectively.