Define: Ad Valorem

Ad Valorem
Ad Valorem
Quick Summary of Ad Valorem

“Ad valorem” is a Latin term used in taxation that means “according to value.” In legal contexts, it refers to a type of tax imposed on property or goods based on their assessed value. Ad valorem taxes are calculated as a percentage of the assessed value of the property or goods, with the tax rate typically set by the government or taxing authority. Common examples of ad valorem taxes include property taxes, which are based on the assessed value of real estate, and sales taxes, which are based on the purchase price of goods or services. Ad valorem taxes are often used by governments to generate revenue for public services and infrastructure based on the perceived value of the property or goods being taxed.

What is the dictionary definition of Ad Valorem?
Dictionary Definition of Ad Valorem

In proportion to the estimated value of the goods or transaction concerned.

Latin: According To Value Denotes a tax, duty or commission calculated as a percentage of the total invoice value of goods or services. VAT (Value Added Tax) is an Ad Valorem tax.

Full Definition Of Ad Valorem

adj. Latin for “based on value,” which applies to property taxes based on a percentage of the county’s assessment of the property’s value. The assessed value is the standard basis for local real property taxes, although some places “caps” (maximums) on the percentage of the value (as under Proposition 13 in California) or “parcel taxes” which establish a flat rate per parcel.

According to value.

The term ad valorem is derived from the Latin ad valentiam, meaning “to the value.” It is commonly applied to a tax imposed on the value of property. Real property taxes that are imposed by the states, counties, and cities are the most common type of ad valorem taxes. ad valorem taxes can, however, be imposed upon personal property. For example, a motor vehicle tax may be imposed upon personal property such as an automobile.

An article of commerce may be subjected to an ad valorem tax in proportion to its value, which is determined by assessment or appraisal.

Duties, taxes on goods imported or brought into this country from a foreign country, are either ad valorem or specific. An ad valorem duty is one in the form of a percentage on the value of the property, unlike a specific duty that is a fixed sum imposed on each article of a class, such as all Swiss wristwatches, regardless of their individual values.

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Definition Sources

Definitions for Ad Valorem are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 7th March, 2024.

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