Ad valorem is a Latin expression that means “according to value.”
In general, ad valorem tax is any tax based on the value of a property. When it comes to customs, it is the value of the goods according to which the rate of import duty is determined.
Each item has a code in the Harmonised System (also called an HS code) that determines the rate of the tax.
For example, if you were to purchase a laptop from abroad worth £1000, you would be responsible for paying customs duty and import tax. The ad valorem would be a percentage of the computer’s total value.
You will recognise this tax by its acronym: a.v. or Ad. Val.
When it comes to ad valorem tax for imported goods, it is levied by a country’s customs authority.