The EEC Decision on the
Classification of Licenses on Paper according to the HS code
Classification of Licenses on Paper according to the HS code
June 2024
On 23 May 2024, Decision of the Board of the Eurasian Economic Commission No. 56 dated 21 May 2024 (hereinafter referred to as the “EEC Decision”) on the classification of a license on paper in accordance with the unified Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union (hereinafter referred to as the “HS”) was published on the website of the Eurasian Economic Commission.
It is common practice to grant rights to use the software (hereinafter referred to as the “Software”), with the special code designations (licenses), passwords, activation keys for unlocking the Software or obtaining the right to use the Software handed over on paper. Such activation keys are designed to protect the Software from unauthorized use by any third parties and, in practice, they can be handed over in a text format on plain paper, which can result in disagreements when the customs authorities classify goods by determining the appropriate HS code.
Current practice
The customs authorities, business and experts are divided in their positions as to which HS code shall be used to classify licenses when importing and declaring them.
Thus, the customs authorities consider that licenses handed over on paper should be classified according to code 4911 (“Other”) and be subject to import customs duty at the rate of 10% (see the State Revenue Committee’s explanation on the official Internet resource of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan).
Therefore, in practice, importers declare such licenses on paper carriers in heading 4901 of the HS with a zero rate of import customs duty, and customs authorities, as part of customs inspections, reclassify goods to heading 4911 of the HS and assess additional amounts based on the code change.
Adoption of the EEC Decision
The EEC Decision leads to a unified practice in the classification of paper licenses
according to the HS. Under the EEC Decision, such licenses will be classified in
heading 4901 of the HS and, as a result, they will not be subject to import customs duty upon declaration.
The EEC Decision comes into force 30 calendar days after its publication, i. e., from 21 June 2024.
Our team will be happy to provide legal advice and practical services on the issue of import software and refund of overpaid customs duties for the above licenses in case of their incorrect classification.
Current practice
The customs authorities, business and experts are divided in their positions as to which HS code shall be used to classify licenses when importing and declaring them.
Thus, the customs authorities consider that licenses handed over on paper should be classified according to code 4911 (“Other”) and be subject to import customs duty at the rate of 10% (see the State Revenue Committee’s explanation on the official Internet resource of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan).
Therefore, in practice, importers declare such licenses on paper carriers in heading 4901 of the HS with a zero rate of import customs duty, and customs authorities, as part of customs inspections, reclassify goods to heading 4911 of the HS and assess additional amounts based on the code change.
Adoption of the EEC Decision
The EEC Decision leads to a unified practice in the classification of paper licenses
according to the HS. Under the EEC Decision, such licenses will be classified in
heading 4901 of the HS and, as a result, they will not be subject to import customs duty upon declaration.
The EEC Decision comes into force 30 calendar days after its publication, i. e., from 21 June 2024.
Our team will be happy to provide legal advice and practical services on the issue of import software and refund of overpaid customs duties for the above licenses in case of their incorrect classification.
Contacts
- Dinara Tanasheva
Partner, Head of Tax & Law Practice in
Kazakhstan and Central Asia
Tel.: +7 (727) 258 5960
Dinara.S.Tanasheva@kz.ey.com
- Kuanysh Ospanov
Head of Customs Affairs,
Tax & Law Practice in Kazakhstan and
Central Asia
Kuanysh.Ospanov@kz.ey.com
- Dilfariz SharipovSenior Associate, Tax & Law Services
Dilfariz.Sharipov@kz.ey.com