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

In other cases, different higher rates are imposed on the consumption of luxury or semi-luxury goods instead of other additional taxes to the VAT;

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;

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 and scope;

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;

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.

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.

All compatible general provisions regulating the added value type taxes (VAT) are applicable to the "excise type taxes" (ISC), and specially the following:

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.

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.

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.

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.

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.

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.

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.

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.