ENCUMBERED ASSETS: CHARACTERISTICS AND EXAMPLES - ARTE - 2025

The encumbered assets are those products which is imposed on the payment of taxes or levies such as value added tax (VAT) at the time of any business transactions with them.

Product taxes are a subheading within the transaction taxes on production and imports. These taxes are paid for the unit of any product or service that has been produced or processed.

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Taxes on taxed goods include value added tax, taxes and duties on imports and exports, and other taxes on products.

For example, excise duties, stamp duty on the sale of specific products, car registration taxes, lottery taxes, insurance premium taxes, etc.

The tax applied to taxed goods can be a specific amount of money per unit, on the quantity of a product or service, or it can be calculated ad valorem as a specific percentage of the unit price or the value of the goods and services produced or traded.

characteristics

Classification

The encumbered assets are classified according to the percentage tax rate applied to them. For example, in Colombia there are several different rates.

General rate

The rate known as the general VAT rate is 16%. The others are known as special or differential rates.

The general VAT rate is applied to the vast majority of taxed goods. However, there are other types of fee, such as:

Exempt

One of these differential rates is the 0% rate. Logically, the products that are taxed with a rate, even if it is 0%, will belong to the group of taxed goods. These products that are charged the 0% rate are known as exempt.

These are taxed assets, but with a 0% fee. As they are taxed, for this reason they generate VAT, only that the rate applied to them is 0%.

In principle, this seems absurd. However, it has its reason for being. Since an exempt product is a taxed good, companies that manufacture exempt goods have a responsibility to pay sales tax. Therefore, they must declare VAT.

Special rates

These are the rates that are below the general rate. For example, for surveillance services a special VAT rate of 1.6% applies.

For some taxed goods a special rate of 10% is applied, such as pasta, sugar, wheat flour, corn flour, coffee, chocolate, salt, milk cookies, cake, mortadella and ham, sausages, accommodation, leases of local.

Differential rates

These rates are those that are above the general rate. For example, for cellular telephony a differential rate of 20% applies. For small cars and motorcycles with a cylinder capacity greater than 185cc a 25% rate applies.

For goods such as imported liquors and luxury vehicles, a 35% fee applies.

Foods

Most foods are exempt from sales tax. The food exemption includes:

- Food products.

- Diet foods.

- Health supplements.

- Certain drinks.

Food in general must meet these conditions to be tax exempt:

- They must be sold for human consumption.

- They must be sold in the same form, condition, quantities and packaging that are commonly used in retail food stores.

On the other hand, the foods and beverages presented below are not exempt from tax:

- Sweets and confectionery.

- Alcoholic drinks.

- Soft drinks, fruit drinks or similar drinks.

- Hot or prepared meals (sandwiches, salad bars, etc.).

- Food or drinks that are sold for consumption in different facilities.

Consumption tax

The consumption tax, which is also known as the luxury tax, is an indirect tax, which is charged for the sale of particular products.

It is said that it is an indirect tax, because the tax body does not apply this tax to the consumer directly. Instead, it is charged to producers, manufacturers, and traders, who pass the tax on to the consumer through higher product prices.

These taxes are often applied to items such as tobacco and alcohol, to discourage their use.

Examples

Cigarettes

According to the Centers for Disease Control and Prevention, the annual death rate attributable to tobacco use is higher than the combined number of deaths from HIV, alcohol use, motor vehicle injuries, illegal drug use, murder, and suicide.

To discourage tobacco use, both the federal and state governments have imposed higher taxes on tobacco products, such as cigarettes.

Part of the income from these taxes is used to fund health education programs and to prevent disease.

As of 2010, in the US, a pack of cigarettes carries a tax of $ 2.11.

Gasoline

The vehicle fuel tax is collected to help conserve energy and reduce pollution.

The income generated is used to maintain the country's vehicle infrastructure. Therefore, they can be considered as a fee per user. This tax costs about 50 cents per gallon.

Alcohol

Alcoholic beverages, beer, and wine also attract high taxes. However, there are movements to further increase these tax rates seeking to curb excessive alcohol consumption and its serious bifurcations, such as motor vehicle accidents caused by drunk drivers and illnesses.

As of 2010, in the US a 750 ml bottle of liquor. carries a tax of $ 2.15, a can of beer of 350 ml. It has a 4 cent tax and a 750 ml bottle of wine. it has a tax of 22 cents.

Plane tickets

In addition to sales tax and state and federal taxes, airline tickets also carry flight segment tax, 9/11 security fees, and installation fees.

The flight segment tax corresponds to each landing and take-off. Therefore, a flight with multiple changes or stopovers will attract multiple flight segment tax charges.

A $ 200 ticket costs as of 2010 about an additional $ 60 in taxes and fees. This does not include baggage fees or other fees implemented by airlines.

Firearms

Revolvers and pistols carry a 10% tax on the price as of 2010. Ammunition and other firearms are taxed at 11% on the price, in addition to sales tax.

References

1. Eurostat (2019). Glossary: ​​Taxes on products. Taken from: ec.europa.eu.
2. Helen Harvey (2019). What Are Some of the Highest Taxed Items? Sapling. Taken from: sapling.com.
3. Kmila (2011). What Are Encumbered Assets? Taxed Assets. Taken from: Bienesgravados.blogspot.com.
4. EAFIT (2019). VAT. Taken from: eafit.edu.co.
5. New York State Department of Taxation and Finance (2011). Listings of Taxable and Exempt Foods and Beverages Sold by Food Stores and Similar Establishments. Taken from: tax.ny.gov.