Occupational Standard: Accounts and Budget Support Level III

Unit Title Calculate Taxes, Fees and Charges

Unit Code BUF ACB3 14 0812
Unit Descriptor This unit covers the skills and knowledge required to determine liability
to pay taxes, fees and charges and calculate amounts payable. It
includes assessing goods and documents for liability; calculating taxes,
fees and charges; and completing transaction records.
In practice, calculating taxes, fees and charges may overlap with other
generalist or specialist public sector workplace activities such as acting
ethically, complying with legislation, working effectively, using
resources and financial systems, organising workplace information, etc.

Elements Performance Criteria

1. Assess goods 1.1 Goods and documents are examined in accordance with
and documents legislation, organizational guidelines and procedures.
for duty and tax 1.2 Class of taxes, fees or charges is determined in accordance with
liability legislation and guidelines.
1.3 The value of the goods/services is determined.
1.4 Liability to pay taxes, fees and charges is determined in
accordance with legislation, policies and guidelines.
1.5 The rate of taxes, fees and charges is determined in accordance
with organizational policy and procedures.
2. Calculate taxes, 2.1 Taxes, fees and charges are calculated in accordance with
fees and relevant legislation, policies and guidelines.
charges 2.2 Relevant systems are used to assess amounts payable.
2.3 All calculations are made accurately and checked for consistency.
3. Complete 3.1 Records of transaction are completed clearly and accurately in
transaction accordance with organizational guidelines, and identify all relevant
records information.
3.2 Transaction records are issued in accordance with organizational
guidelines and standard operating procedures.
3.3 Copies of transaction records are retained and stored in
accordance with legislation, policies, guidelines and procedures.
Variable Range
Goods may  air and sea cargo
include:  hand-held cabin baggage
 passenger and crew baggage
 'per favour' items
 postal items
 unaccompanied baggage
 bulk and Containerized products
Legislation,  enabling and allied legislation and regulations, such as:
organisational  Customs duty law
guidelines and  Customs Tariff
procedures may  Excise Tax law
include:  Quarantine law

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  Imported Items Control regulations
 Export Control regulations
 organisational policies and procedures
 work area standard operating procedures/work instructions
 procedures manuals
 occupational health and safety and environment legislation and
guidelines
Taxes, fees and  tariffs
charges may  duty
include:  penalties
 infringement notices
 taxes, such as:
 Goods and Services Tax
 Luxury goods Tax
 fees for service, such as:
 treatment and return to sender charges
 document charges
 fees associated with import directions
 inspection charges
Value of the goods  value of the taxable import
may include:  customs value
 prescribed weight
Liability to pay  possible tax exemptions
includes  possible customs exemptions
consideration of:  who has liability (i.e owner or packer)
Rate may take  charging guidelines
account of:  legislated penalty units
 origin of the goods
 applicable concessions
 correct tariff classification
Relevant systems  specific 'ready beckoners'
or packages may  revenue systems
include:  Duty calc
 COMPILE
 AIMS /Accounting Information Management System/
 EXDOC /Export Documentation System/
Records of  informal clearance documents
transactions may  customs entry
include:  invoice
 demand for payment
 record of credit payment
 other forms of receipt

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 MODULE TITLE: Calculating taxes, Fees and Charges
LEARNING OUTCOMES:
At the end of this module the trainer will be able to
LO1: Assess goods and documents for duty and tax liability
LO2. Calculate taxes, fees and charges
LO3: Complete transaction records

LO1: Assess goods and documents for duty and tax liability

Definition of terms

A duty is a kind of tax levied by a state. It is often associated with customs, in which context
they are also known as tariffs or dues. ... Duties may be import duties, excise duties, stamp
duties, death or succession duties, etc.; but not such direct impositions as personal income taxes.
Duties and taxes are imposed to generate revenue and protect local industry; almost all shipments
crossing international borders are subject to duty and tax assessment by the importing country's
government. Customs officials assess duties and taxes based on information provided on the
shipping label, the Commercial Invoice, and other relevant documents.

Fee is a sum of money that you pay to be allowed to do something. He hadn't paid his television
1.licence fee. 2. Countable noun. A fee is the amount of money that a person or organization is
paid for a particular job or service that they provide.

it is not easy to distinguish between those fees and user charges which are to be treated as taxes
and those which are not, since, whilst a fee or charge is levied in connection with a specific
service or activity, the strength of the link between the fee and the service provided may vary
considerably, as may the relation between the amount of levy and the cost of providing the
service

A tax is a mandatory fee or financial charge levied by any government on an individual or an

organization to collect revenue for public works providing the best facilities and infrastructure.
The collected fund is then used to fund different public expenditure programs. If one fails to pay
the taxes or refuse to contribute towards it will invite serious implications under the pre-defined
law.

Tax penalties are imposed to punish the taxpayer while interest simply compensates the federal
government for the lost time value of the tax

The Customs Proclamation No. 859/2014 (herein after, "the proclamation") sets the base for
the regulation of customs duty, tariff and tax in Ethiopia. Hence, some of the major issues
relating to customs duties and taxes are dealt with below in accordance with the proclamation.
(Other relevant laws will also be dealt, though briefly.)

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Under the current Ethiopian Legal Regime, duties and taxes are payable for any imported or
exported goods unless otherwise provided by law or decided by the Ministry of Revenue. Article
110 of the Proclamation states that a declarant is liable for payment of the duties and taxes
imposed on the goods, as well as penalties and interests incurred due to default thereof. In fact,
where a customs clearing agent commits an error resulting in the non- payment of duties and
taxes, he/she is jointly and severally liable with the declarant for the payment of the unpaid
duties an

1. Applicable Dates for Assessment and Payment of Customs Duties and Taxes

(Article 111 of the Proclamation)

Unless otherwise provided by law, the duties and taxes on import or export goods is assessed on
the basis of the law in force on the date of acceptance of the goods declaration or the date of
correction under Article 93 of the Proclamation (deductive value method). Where it is not
possible to determine the date of lodging or acceptance of the goods declaration, the duties and
taxes is assessed on the basis of the law in force on the date determined by the Authority.

2. Customs Duty and Tariff Rates

A duty on goods imported into the customs territory is paid at the rates specified by the Customs
Tariff Regulation. Accordingly, there are six duty tax rates (0%, 5%, 10%, 20%, 30%, and 35%)
which are applicable based on the type of the good imported. The reason behind the variation of
duty tax rates is the need for encouraging the importation of some goods by imposing 0% tax
rate and at the same time to discourage importation of selected goods by imposing a higher tax
rate.

There are two schedules for the purpose of determining the applicable tax rates. The first
schedule encompasses raw materials, semi-finished goods and import items for public use. Note
that the tax rate for this category is lesser, keeping in mind that the imported good enhances
domestic production or his for public use such as ambulances. Hence, raw materials and
producers goods are largely zero rated although it may increase to 10 % and the tax rate for semi-
finished goods is 10% and 20%. On the contrary, the second schedule contains consumer or
finished goods that are imported for personal use or for a non-productive purpose. The higher
duty tax rates are usually applied for consumer goods such as automobiles for personal use.

3. Determination of Dutiable Value

Article 89 of the Proclamation, asserts that:

 The dutiable value for imported goods is the actual total cost of the goods up to the first
entry point to the customs territory of Ethiopia; and
 The dutiable value for export goods is the actual total costs of the goods up to the final
exit point from the customs territory of Ethiopia.

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In both circumstances, the total cost means the cost of the good, insurance, freight and other
charges. Therefore, the Customs Commission (former ERCA) normally charges customs duty
and tax as a percentage of the duty paying value of goods, which is the sum of the amounts paid
for the imported or exported good up to the point of entry into or exit from the customs territory,

Assess goods and documents for duty and tax liability

For import customs clearance procedures and formalities in some of the importing
countries.

Bill of Entry:

Bill of entry is one of the major import documents for import customs clearance. As explained
previously, Bill of Entry is the legal document to be filed by CHA or Importer duly signed. Bill
of Entry is one of the indicators of ‘total outward remittance of country’ regulated by Reserve
Bank and Customs department. Bill of entry must be filed within thirty days of arrival of goods
at a customs location.

Once after filing bill of entry along with necessary import customs clearance documents,
assessment and examination of goods are carried out by concerned customs official. After
completion of import customs formalities, a ‘pass out order’ is issued under such bill of entry.
Once an importer or his authorized customs house agent obtains ‘pass out order’ from concerned
customs official, the imported goods can be moved out of customs

Commercial Invoice
Invoice is the prime document in any business transactions. Invoice is one of the documents
required for import customs clearance for value appraisal by concerned customs official.
Assessable value is calculated on the basis of terms of delivery of goods mentioned in
commercial invoice produced by importer at customs location. I have explained about the
method of calculation of assessable value in another article in same web blog. The concerned
appraising officer verifies the value mentioned in commercial invoice matches with the actual
market value of same goods. This method of inspection by appraising officer of customs
prevents fraudulent activities of importer or exporter by over invoicing or under invoicing. So
Invoice plays a pivotal role in value assessment in import customs clearance procedures

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Bill of Lading / Airway bill
BL/AWB is one of the documents required for import customs clearance.

Bill of lading under sea shipment or Airway bill under air shipment is carrier’s document
required to be submitted with customs for import customs clearance purpose. Bill of lading or
Airway bill issued by carrier provides the details of cargo with terms of delivery. I have
discussed in detail about Bill of Lading and Airway bill separately in this website. You can go
through those articles to have a deep knowledge about documents required for import customs
clearance.

Import License
As I have mentioned above, import license may be required as one of the documents for import
customs clearance procedures and formalities under specific products. This license may be
mandatory for importing specific goods as per guide lines provided by government. Import of
such specific products may have been being regulated by government time to time. So
government insist an import license as one of the documents required for import customs
clearance to bring those materials from foreign countrie

Insurance certificate
Insurance certificate is one of the documents required for import customs clearance procedures.
Insurance certificate is a supporting document against importer’s declaration on terms of
delivery. Insurance certificate under import shipment helps customs authorities to verify,
whether selling price includes insurance or not. This is required to find assessable value which
determines import duty amount

Purchase order/Letter of Credit

Purchase order is one of the documents required for import customs clearance. A purchase order
reflects almost all terms and conditions of sale contract which enables the customs official to

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confirm on value assessment. If an import consignment is under letter of credit basis, the
importer can submit a copy of Letter of Credit along with the documents for import clearance.

Technical write up, literature etc. for specific goods if any

Technical write up, literature of imported goods or any other similar documents may be required
as one of the documents for import clearance under some specific goods. For example, if a
machinery is imported, a technical write up or literature explaining it’s function can be attached
along with importing documents. This document helps customs official to derive exact market
value of such imported machinery in turn helps for value assessment.

Industrial License if any

An industrial license copy may be required under specific goods importing. If Importer claims
any import benefit as per guidelines of government, such Industrial License can be produced to
avail the benefit. In such case, Industrial license copy can be submitted with customs authorities
as one of the import clearance documents.
RCMC Registration cum Membership Certificate if any

For the purpose of availing import duty exemption from government agencies under specific
goods, production of RCMC with customs authorities is one of the requirements for import
clearance. In such cases importer needs to submit Registration Cum Membership Certificate
along with import customs clearance documents.

Test report if any

The customs officials may not be able to identify the quality of goods imported. In order to
assess the value of such goods, customs official may draw sample of such imported goods and
arranges to send for testing to government authorized laboratories. The concerned customs
officer can complete appraisement of such goods only after obtaining such test report. So test
report is one of the documents under import customs clearance and formalities under some of
specific goods.

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Import Procedures Imports to Ethiopia require:

 Agency agreement  Insurance certificate;

 A bank permit  Packing list;
 A bill of lading or airway bill;  Tax identification number(TIN)
 Certificate of origin; certificate;
 Commercial invoices;  Pre shipment inspection clean report
 Customs import declaration; of findings;
 Foreign exchange authorization;  Transit document;
 Import license ;  Value added tax (VAT) Certificate.

How to import goods into Ethiopia – summary of steps

1. Obtain an import license / investment license

2. Obtain a pre-import permit (for certain restricted goods only)
3. Arrange payment issues
(a) Foreign currency approval
(b) Obtain bank permit/arrange mode of payment or Franco valuta
4. Collect commercial documents required for customs declaration
5. Prepare the customs declaration
6. Submit the customs declaration
7 Obtain import customs clearance and goods release note
8. Pay service charges, exit goods from customs warehouse, and receive final import customs
declaration
9. Submit clearance declaration to NBE
Similarly to the case of imports, an exporter has to prepare a custom declaration to ERCA,
accompanied by documents. The exporter should therefore collect the documents prior to filing
the

1. Obtain an import license

 The first step to import a good is to obtain an import license.
 Licenses are issued by the concerned government offices against the submission of
completed application form along with the following documents:
 A copy of the Tax Identification Number (TIN);
 A copy of the Memorandum of Association and Articles of Association for private
limited and share companies;
 A contractual agreement of office rent or office building plan;
 A document evidencing the capital allocated for the commercial activity;
 Two passport size photographs taken within the last six months;
 If the applicant is a foreign investor, the investment and residence
 permits; and
 A valid business registration certificate

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2. Obtain a pre-import permit for certain restricted goods in Ethiopia

The import of certain goods into Ethiopia is restricted for safety, security, environmental, health
and other reasons, i.e. they must not be imported without permission important restricted goods
and the responsible regulatory agencies issuing pre-import permits below. However, the import
of other goods may also be restricted, and any importer should check in advance, with ERCA
and/or regulatory agencies, if the import goods are subject to controls or limitation

Goods with pre-import restrictions and corresponding regulatory agencies

Restricted goods Regulatory agency

Pharmaceuticals and
medicines, medical Food, Medicine and Health Care
supplies or Administration and Control
instruments, baby Authority (FMHACA)
food, food supple-
ments, cosmetics

Veterinary drug and Veterinary Drug and Feed

animal feed Administration and Control
Authority (VDFACA)
Communication equip- Information Network Security
ment Agency (INSA)

Telecommunication Ministry of Communication and

and network equip- Infor- mation Technology (MCIT)
ment
Radiation emitting Ministry of Communication and
equipment and Infor- mation Technology (MCIT)
radioac- tive sources.
Vehicles Ethiopian Transport Authority

Permissions are granted in a two-stage process: first, a pre-import permit by the relevant
regulatory agency must be obtained before the import procedure starts. At a later stage, an import
permit must be obtained.

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3. Arrange payment issues

An important step early in the process – after the pre-import permit is secured, if required – is to
prepare for the payment of imported goods, which might be through a bank or
francovaluta.Payment through a bank requires two tasks.
First, a foreign currency approval must be obtained. This approval is necessary due to the foreign
exchange controls in place and will allow the importer to pay for the imported goods in foreign
currency.
Second, the payment arrangements have to be agreed with the importer’s bank. Foreign currency
approvals must be requested through the bank at which the importer has the account which is to
be used for the import. As part of the request, the importer must present his/her valid business
license and a pro-forma invoice from the supplier. The pro-forma invoice should describe the
imported goods, state the unit price, quantity and total price, as well as list additional charges
that may be applied on the transaction. Currently, foreign currency approvals are issued by
Commercial banks and are processed manually; the time required for the approval depends on
the availability of foreign currency requested. The second task within the payment issues is to
arrange with the bank for the method of payment and obtain a bank permit. In this regard, the
methods of payment for imports used in Ethiopia are the following:

 Letter of credit (L/C), in which the bank undertakes to pay the supplier a stated sum of
money within a prescribed time limit and against the hand-over of the documents needed
for the release of goods from customs;
 Cash against document (CAD), where the importer’s bank hands over to the importer
the documents needed for the release of goods from customs against full payment;
 Advance payment, i.e. the importer orders the bank to pay the seller via SWIFT transfer
prior to shipment or rendering the service
4. Collect documents
Once the payment issues have been completed and the supplier has been informed, the goods
will be shipped to Ethiopia. Upon arrival of the goods at the port of entry in Ethiopia, they will
be placed in a customs warehouse, and the importer must accomplish the necessary customs
formalities. For this, the first step is to collect the necessary commercial documents from his/her
bank (in case of L/C or CAD) or directly from the supplier (in case of advance payment).
The following documents are necessary for the preparation of accustoms declaration
 Transportation document such as bill of lading, air way bill ortruck way bill;
 Invoice which describes the value of imported goods;
 Bank document, i.e. L/C, CAD, confirmation of advance payment/TT;
 Packing list which describes how the goods are packed during transport;
 Certificate of origin which describes where the goods were originally produced;
 Other documents as required, such as pre-import permits issued by regulatory agencies
and duty free permits for investment goods.
With the exception of the other documents, all documents will be obtained from the bank and/or
the supplier

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5. Prepare customs declaration
The importer or his/her agent is required to fill in the clearance customs declaration, indicating
the type of import regime, detailed data or information about the imported goods, and also tariff
classification and customs valuation, which leads to determining the import duties and taxes.
According to the Ethiopian tax laws the following duties and taxes are levied on imported goods:
Custom duties, excise tax, value added tax, surtax and withhold tax

6. Submit the customs declaration

To obtain clearance of imported goods from ERCA, two different procedures exist, depending on
the type of transport used for the goods, i.e. whether it is multi-modal or unimodal. Under
multimodal transport, goods are transported under a single contract with the logistics company
but using different means of transport (e.g., sea and road transport). Conversely, unimodal
transport only uses one means of transportation.
7. Obtain import customs clearance and goods release note
After submitting the customs declaration, ERCA first determines, and notifies the importer of the
decision, whether to accept or reject it based on an initial compliance check, including of the
completeness of documentation submitted. If accepted, the risk level of the consignment is
determined using the customs management system. ERCA distinguishes three risk levels, i.e.
Green (automatic release of goods without further checks), Yellow (requiring the verification of
the declaration only), and Red (requiring the verification of the declaration and the physical
examination of the imported goods) and Blue
The examination of the declaration includes the verification of the correctness of data
information, tariff classification, valuation and payment of duties and taxes registered and
supporting documents attached to declaration. The verification process may also include the
fulfillment of legislative requirements administered by other regulatory agencies, such as
veterinary, health and/or phytosanitary issues.
The physical examination of goods is performed to satisfy that the origin, country of export,
nature, condition, quality, quantity, tariff classification and value of the goods are in accordance
with the information furnished in the goods declaration

In addition to ERCA’s clearance activities, other regulatory bodies will also be involved in the
clearance of certain imported goods. This applies to all goods for which pre-import permits are
issued, as well as the ones listed below for which an import permit is issued only at the time of
clearance. The importer or his/her agent is responsible for obtaining the necessary permits from
the regulatory agencies at the time of clearance.

Table 4: Regulatory agencies issuing import permits at the time of clearance

agency Certificates and permits issued

Ministry of Agriculture & Natural Resources Phytosanitary certificate and veterinary health
(MOANR) certificate, export permit,
Pre-import permit and import release permit
Ethiopian Conformity Assessment Enterprise Laboratory test report, quality certifi- cate
Food, Medicine and Health Care Special import permit
Administration and Control Authority
Veterinary Drug and Feed Administration and Import release permit

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Control Authority
Information Network Security Agency Import release permit

8. Import customs declaration

As the goods have been stored in a customs warehouse during clearance, storage fees must
normally be paid by the importer; in addition, other service charges (e.g. for scanning of
goods) might apply. Therefore, the importer must settle these charges once the goods release
note has been issued. The goods will then be released and the importer takes possession of
them. In addition, ERCA will issue a final declaration for the importer as a certificate of
completing the import procedures and importation of goods.

9. Submit clearance declaration to NBE

Any importer who obtained a foreign currency permit should present the final import
customs declaration to the NBE. This is a requirement for importing (or exporting) goods
in the future.
An importer must keep all records and documents related to the import for five years
from the date of ERCA’s acceptance of the goods declaration. During this period, ERCA
may perform a post clearance audit of the import. The purpose of such audits, which may
cover traders’ commercial data, business systems, records and books, is to verify the
accuracy and authenticity of declarations and information provided by the import

How to export goods from Ethiopia –summary of steps

1. Obtain an export license
2. Arrange payment issues
3. Collect documents
4. Obtain export permit (for goods restricted for export only)
5. Prepare the customs declaration
6. . Submit the customs declaration
7. Obtain export customs clearance and ship goods
8. Pay service charges and receive final export customs declaration
9. Submit clearance declaration to NBE
Similarly to the case of imports, an exporter has to prepare a custom declaration to ERCA,
accompanied by documents. The exporter should therefore collect the documents prior to filing
the Declaration.
The following documents are necessary

 Transportation document such as bill of lading, air way bill or truck way bill;
 Invoice which describes the value of the goods to be exported;
 Bank document, i.e. L/C, CAD, confirmation of advance payment/telegraphic transfer;
 Packing list which describes how the goods are packed during transport;
 Certificate of origin which describes where the goods were originally produced.

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Lo2 Calculate taxes, fees and charges
According to the Ethiopian tax laws the following duties and taxes
Are levied on imported goods:
The calculation of the duties and taxes on imports to be paid to ERCA is the responsibility of the
importer. This requires the following steps.
• First, the goods must be classified in order to determine the applicable import duty (tariff
classification).
• Second, the value of the imported goods for the purpose of calculating duties and taxes must be
established (customs valuation).
• Third, the duties and taxes payable must be calculated by applying the respective percentages
on the respective base values
• Customs duty is normally calculated as a percentage of the duty paying value, also known as
CIF value. This is the sum of the transaction value (cost of goods), transport charges paid to
ETHIOPIAN CUSTOMS GUIDE - MARCH 2017transport the good from the original port of
loading to the port of entry in Ethiopia, the transport insurance paid and other. Charges such as
loading and unloading charges, port charges, etc. The duty rate varies depending on the type of
imported goods and ranges from 0-35%.
• Excise tax is charged on selective goods such as luxury goods, basic goods demand for which
is hardly affected by price changes, goods that are hazardous to health, etc. The excise tax is
computed on the basis of the CIF value plus the amount of the customs duty payable. The rate of
the excise tax varies depending on the type of imported goods, from 10%-100%.

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Excise Tax Rate for Different Product Types

S.N Type of Product Excise

. Tax
Rate
(%)

1 Any type of sugar/In solid form excluding Molasses 33

2 Drinks  

  All types of soft drinks/except Fruit/ Juices 40

  Powder soft drinks 40

  Water bottled or canned in a factor 30

  Alcoholic drinks  

  All types of beer & stout 50

  All types of wine 50

  Whisky 50

  Others alcoholic drinks 100

3 All types of pure Alcohol 75

4 Tobacco & Tobacco products  

  Tobacco leaf 20

  Cigarettes, Cigar, Cigarillos, pipeTobacco snuffs and other tobacco 75

products

5 Salt 30

6 Fuel-Super Benzene, Regular Benzene, Petrol, Gas-online and other 30

motor spirits

7 Perfumes and toilet waters 100

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 S.N Type of Product Excise
. Tax
Rate
(%)

8 Textile and Textile products  

  Textile fabrics, knitted or woven of natural silk, Rayon, nylon wool or 10

other similar material

  Textile of any type partly or wholly made from cotton which is gray, 10
white, dyed or printed, in pieces of any length or width /except mosquito
net and "Abudgedid"/ and including blankets, bed sheets, counterpanes,
towels, table clothes and similar articles

  Garments 10

9 Disk washing machines of a kind for domestic use 80

10 Washing machines of a kind for domestic purpose 30

11 Video decks 40

12 Television and video cameras 40

13 Television broadcast receivers whether or not combined with 10

gramophone, radio, or sound receivers and reproducers

14 Motor passenger cars, station wagons, utility cars, and land rovers, tips  
pickups, similar vehicles/including motorized caravans/ whether
assembled, tighter watt gaur appropriate initial equipment.

  Up to 1,300 C.C 30

  From 1,301 C.C up to 1800 C.C 60

  Above 1,800 C.C 100

15 Carpets 30

16 Asbestos and Asbestos products 20

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 S.N Type of Product Excise
. Tax
Rate
(%)

17 Clocks and watches 20

18 Dolls and toys 20

• Value added tax (VAT) is levied at a flat percentage rate of15% on the sum of CIF value,
customs duty, and excise tax.Some types of supplies of goods, services and imports are
exempted from payment of VAT.
• Surtax of 10% is levied on all goods imported to Ethiopia with some exceptions, such as
fertilizers, petroleum and lubricants, etc. The amount payable is calculated on the sum of CIF
Value, customs duty, excise tax, and VAT.
• Withholding tax is collected on goods imported for commercial use, at a level of 3% on the
CIF. The collected amount is creditable against the taxpayer’s income tax liability. For the year.
Thus, it is not a tax in itself but rather a (partial) guarantee on the payment of income taxes.
The calculation of the duties and taxes on imports to be paid
Tariff Calculation

Total Cost of the goods = FOB Cost + Insurance + Freight

Total Cost of the goods x Import Customs Duty = A
(Total Cost of the goods + A) x Excise Tax Rate (If applicable) = B
(Total Cost of the goods + A + B) x VAT = C
(Total Cost of the goods + A + B + C) x Surtax = D
Total Cost of the goods x Withholding Tax = E
TOTAL PAYABLE at THE TIME OF IMPORT = A+B+C+D+E 
Cost of the good, insurance, freight and other charges

Calculation of import duties and taxes – an example

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Project 1

Zona trading engaged in importing commercial vehicles from abroad and sold the vehicles with
after sales service. On March 1, 2015 the company’s cash balance indicates a bank account
balance of br. 12,250,075. During the month the company also imported 20 units of vehicles
from German at FOB value of Euro 40,000 and br. 31,800.00 for insurance and br.88, 200.00 for
freight cost.

The following exchange rate and tax rates are applicable:

Buying selling

Euro 21.57 22

VAT, 15%, Excise tax -30%, Custom duty-35%, withholding tax-3% and sur. Tax, 10%

Required

1. Calculate the total cost of imported vehicles before duty and tax payable assuming that
the enterprise charged 1.5% for service charge on FOB value by bank

2. Calculate total duty and tax payable at the time of import

3. Based on the above data, determine the account balance in bank at end of the month.

4. Determine total cost of each imported vehicles

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 Task 1. Total cost of imported vehicles before duty and tax payable
FOB value Euro 40,000 x 22 ------------------------------------880,000.00
Insurance-----------------------------------------------------------------31,800.00
Freight cost--------------------------------------------------------------88, 200.00
CIF ------------------------------------------------------------------------1,000,000.00
Service charge (880,000.00 x 1.5 %) ------------------------------13,200.00
Total cost each vehicle ----------------------------------------------1,013,200.00
Task 2. Total duty and tax payable at the time of import
Custom duty = 1,000,000 x 35% = 350,000.00
Excise tax = (1,000,000 + 350,000) x 30% = 405,000.00
VAT = (1,000,000 +350,000 +405,000) x 15% = 1,755,000 x 15% = 263,250.00
Sure tax = (1,000,000 +350,000 +405,000+263,250) x 10% = 201,825.00
Withholding = 1,000,000 x 3% = 30,000
Total duty & tax payable= 350,000 + 405,000 + 263,250 + 201,825 + 30,000 = 1,250,075

Task 3. Determine the account balance in bank at end of the month

Total Paid cash amount = CIF + Duty & tax pay. = 1,000,000.00 + 1,250,075= 2,250,075

Ending balance = beginning balance – Total paid cash amount

12,250,075.00 – 2,250,075= 10,000,000.00

Task 4. Determine total cost of each imported vehicles

Paid cash amount each vehicles = Total paid cash amount - VAT – Withholding
20 unit vehicles
(2,250,075-263,250 – 30,000)÷20 = 1, 956825÷20 = 97841.25 OR
2,250,075.00 ÷ 20 = 112,503.75

lo3. Complete transaction records

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 informal clearance documents
customs entry
invoice
demand for payment
record of credit payment
other forms of receipt

Record the Import of Goods under GST

You can account for the import of goods using a purchase invoice, record tax payment, and then
raise liability on the tax payable

In an import transaction, GST applicability depends on the type of import:

 Taxable import: Integrated tax is applicable. Select Imports Taxable as the Nature of
transaction in the purchase ledger created for taxable imports.
 Exempt import: No tax is applicable. Select Imports Exempt as the Nature of transaction
in the purchase ledger created for exempt imports.
 Nil rated import: No tax is applicable. Select Imports Nil Rated as the Nature of
transaction in the purchase ledger created for nil rated imports

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