Vehicle purchase, usage tax in Latin America
Although vehicle taxation in Latin America is a complex matter which cannot be thoroughly explained in just a few paragraphs, here are some of the key points you must know when it comes to car purchasing and ownership taxes in the region’s largest automobile markets.
Brazil
On average, approximately 48%-55% (est. 2016) of the purchase price of a vehicle in Brazil is made up of embedded taxes. Among them are import duties, Federal VAT (PIS social integration tax and the Cofins income tax on fuels), State VAT (ICMS interstate tax), and Federal Industrialization Tax (IPI).
In terms of car ownership taxes, the individual or legal entity which owns the vehicle needs to pay three annual fees. According to international accounting and business advisory firm BDO, these are the three.
The first is a license and registration fee (Certificado de Registro e Licenciamento do Veículo) which is mandatory if you want to operate the vehicle on public roads. The fee is variable, depending on each and every car, and it is pre-determined by the local authorities.
The second is the IPVA vehicle property tax (Imposto sobre a Propriedade de Veículos Automotores) which is 4% of the listed price of the vehicle. Hybrid and electric cars receive a 50% reduction on IPVA.
Thirdly a variable fee for compulsory Insurance (Seguro DPVAT) also needs to be paid. Finally, note that car ownership - whether owned directly or provided by a company - needs to be reported on individual tax returns for informative purposes.
Mexico
Vehicle owners have two key fiscal responsibilities in Mexico. One is the vehicle purchase tax or car alienation and definitive import tax which is equivalent to 2%-17% of the price of the vehicle. It is paid monthly and due on the 17th of every month.
The second is the car ownership tax. It is a state tax which is due in the first quarter of each year. According to the accounting firm, the rate varies depending on the price of the car and the states where the plates were issued.
Argentina
Once an individual or company buys a car in Argentina, a one-time vehicle purchase tax is due. The rate paid is 1.5% of the market value for national vehicles and 2% for imported vehicles. The value of the car is determined by a valuation table organized by public authorities.
Moreover, an annual vehicle circulation tax is also due within the corresponding provincial territory (Auto Registration Fee). It is to be paid by the individual or company who registered the vehicle with the local vehicle adminstration department.
The tax due depends on the vehicle's characteristics and the values determined by the local chamber which represents automobile insurance activities, as well as by insurance companies, specialized publications and the local automobile dealers association. The payment of the tax is annual and, accoring to the firm, it can be divided into six bimonthly installments.
Colombia
To get your new car registered in Colombia, you must present an invoice (in the case of local manufacturing) or an import license, as well as tax receipts and the registration certificate from the National Registry of Transport, locally known as RUNT. In 2017, rates were approximately US$120 for cars and US$67 for motorcycles.
Whether for private or public use, an annual circulation tax is also due at a local jurisdiction (e.g. Bogota) and the tax rate depends on the price of the vehicle. In 2017, the tax rate for vehicles valued at at US$15,000 or less was 1.5%, those from US$15,000-US$33,000 (2.5%), and those above US$33,000 (3.5%).
Chile
In Chile, the car registration fee is a fixed amount of approximately US$80, and must be paid within 30 days of purchase. The annual circulation tax, for individuals or corporations, is due by March of each year. The rate varies from 1%-4.5% of the value of the vehicle.