Harmonization of Excise Type Taxes
IN EXTENDED MEETING OF THE ANDEAN COMMUNITY COMMISSION WITH THE MINISTERS OF
THE ECONOMY, TREASURY AND FINANCE,
HAVING REVIEWED: Article 3, items a), b), e); Article 54, item e); and Article 58 of the Cartagena Agreement, Articles 3 and 4 of the Treaty for the Creation of the Andean Community Court of Justice, Decision 388, and Article 13 of Decision 330; and making use of the attributions specified in items a), b) and f) of Article 22 of the Cartagena Agreement; and
WHEREAS: All the Member Countries have excise type taxes that
intend to influence consumption decisions to regulate them according to the
society ideals and standing, and only in the second place for the generation of
In other cases, different higher rates are imposed on the
consumption of luxury or semi-luxury goods instead of other additional taxes to
The community objectives of an interior market and neutrality
in the circulation and consumption of goods and services advise on the use of an
indirect tax system on consumption that follows the same basic guidelines and,
as far as possible, without structural differences in the regulations of the
Member Countries in order to give economic agents clarity and concurrent free
and comparable conditions;
The different characteristics that the excise type taxes have
in the legal systems of the Member Countries could be substituted with a more
harmonic general system. Nevertheless, it is acknowledged that the Member
Countries can impose excise type taxes on goods and services that are not the
subject matter of this Decision, and therefore, not regulated by it;
In general, the Member Countries have similar national
regulations for excise type taxes, and although the differences could cause
distortions in the market they are by no means extreme ones;
Excise type taxes can be substituted for the added value type
taxes applied with several different rates in some Member Countries;
Consequently, the conditions can be established in the Member
Countries for an indirect tax system that is comparable and clear in its concept
The excise type taxes can include "ad valorem taxes" on the
final price, or "specific taxes" that apply to physical units of the product,
fixed money amounts periodically indexed to the inflation rate;
Tax immunity areas and systems are not within the scope of
the application of this Decision, nor the benefits or systems of geographical or
regional character contemplated in the national legislation of each country,
which will be governed by the national systems and other special provisions;
Scope of the application of the Decision
Article 1.- Scope of the application.
The purpose of this Decision is to harmonize the substantial
aspects and procedures of "excise type taxes" (ISC) in the tax systems of the
Member Countries and enforce the subregional integration policy.
Therefore, the Member Countries shall adopt their tax systems
to this Decision in the terms contemplated therein, irrespective of the scope of
the territorial application of such taxes.
The creation or modification of this type of taxes by the
Member Countries should be adapted to this Decision and notified to the General
Secretariat of the Andean Community.
Article 2.- Nature of the Tax.
"Excise type taxes" (ISC) are imposed on imports and on the
domestic market consumption of specific goods and services, whether individually
or with an additional or complementary character to the added value type taxes,
and are single-phase taxes.
Article 3.- General provision.
All compatible general provisions regulating the added value
type taxes (VAT) are applicable to the "excise type taxes" (ISC), and specially
a) The timeliness of their occurrence, without detriment to
the single-phase system referred to in this Decision.
b) The territoriality principles.
c) The general aspects that regulate the taxable items in
relation to the sale of goods and services on which such tax is imposed, and
d) The definitions of debtor in relation to the operations
on which the tax is imposed.
Article 4.- Generation of the tax.
The excise taxes (ISC) are generated as a result of imports
or the first sale or transfer made by the producer. The excise tax (ISC) on
services is generated as a result of a performed service.
The following will be regulated by the national legislation
of each Member Country:
a) The generation of excise type taxes in the cases in
which it is presumed that a sale or transfer of goods has been made.
b) The generation of excise type taxes, when an economic
connection exists between the buyer and the seller even though involving
further commercialization steps.
c) The application of excise type taxes to other goods and
services not contemplated in this Decision and on which the tax is imposed.
d) The cases in which certain goods and services are
excluded, or tax credit or rebate rights are established.
Article 5.- Withdrawal of goods.
The withdrawal of goods by excise (ISC) taxpayers for any
purpose other than the taxable activity shall give rise to the tax based on the
commercial value of the goods. The tax shall not be imposed on the withdrawal of
goods not used or not susceptible of commercialization for whatsoever justified
reason according to the national legislation of each country.
Article 6.- Excise taxpayers
Without detriment to the rules established in the legislation
of each Member Country relative to solidarity, economic relation, distortions of
the market or special production and commercialization conditions, the following
are excise taxpayers:
a) The producers of taxable goods.
b) The importers of taxable goods.
c) Supplier of taxable services.
d) The users or beneficiaries of the service, in the case of
services rendered by non residents or entities not located in the country.
Article 7.- Tax base or magnitude
The excise tax base shall be defined in the national
legislation of the Member Countries, ensuring that no discriminatory treatment
may exist between domestic and imported products. Added value or excise type
taxes should not be included in ad valorem tariffs.
Article 8.- Tax burden.
The total tax burden should be harmonized considering added
value and excise type taxes imposed at a national or regional level, to fix
minimum rates in the Andean Community, three (3) years after this Decision
enters into effect.
The first phase of the harmonization shall focus on tobacco,
beer and alcohol products.
Determination of the tax
Article 9.- Determination of the tax.
Excise taxes (ISC) shall be determined by applying directly
the rate or fixed amount indicated for the taxable good or service in question
to the tax base or magnitude or reference physical unit, as provided for in the
national legislation of each Member Country.
Article 10.- Tax return.
The taxpayers shall settle the excise taxes (ISC) to which
they are subject in the tax return forms provided for that purpose by the Tax
Authority of each Member Country.
The tax return and payment shall be made as established in
the respective legislation, but no later than the following month after the end
of the tax period.
In operations involving the import of goods, the excise tax
(ISC) return and payment shall be made according to the national regulations of
each Member Country.
The national legislation of each Member Country may establish
special systems for account payments of the excise taxes.
Article 11.- Invoicing.
In each operation carried out involving goods and services on
which excise taxes are imposed, the taxpayers should use a single invoice that
discriminates the VAT and the excise tax (ISC). Such invoices shall fulfill the
requirements set forth in Article 37 of Decision 599: Harmonization of
Substantial Aspects and Procedures of the Added Value Type Taxes.
Article 12.- Term.
As established in Article 3 of the Treaty for the Creation of
the Andean Community Court of Justice, this Decision shall be incorporated to
the national legislation of each Member Country if so provided in its
constitutional system, and will enter into effect the first calendar day of the
immediately following month after the date of the last delivery of the
respective instrument in the General Secretariat of the Andean Community.
Given in the city of Quito, Republic of Ecuador, on July 12, 2004.