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Excise duty on manufactured tobacco

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Excise duty on manufactured tobacco

 

SUMMARY OF:

Council Directive 2011/64/EU — structure and rates of excise duty applied to manufactured tobacco

WHAT IS THE AIM OF THE DIRECTIVE?

It lays down general principles and minimum rates of excise duty on manufactured tobacco (i.e. cigarettes, cigars and cigarillos, fine-cut tobacco for rolling cigarettes and other smoking tobacco) across the EU.

KEY POINTS

Rules applying to cigarettes

  • EU countries must apply minimum excise duties to cigarettes whether they are manufactured in the EU or imported. This tax includes:

    • an ad valorem* excise duty calculated on the maximum retail selling price, including customs duties (EU countries may, however exclude customs duties from the calculation of ad valorem excise duty on cigarettes) and the value-added tax levied on the weighted average retail selling price*;
    • a specific excise duty calculated per unit of the product.
  • The rate of the ad valorem excise duty and the amount of the specific excise duty must be identical for all cigarettes.
  • Since 1 January 2014:

    • the specific component of the excise duty must be between 7.5% and 76.5%.
    • the overall excise duty on cigarettes must constitute at least 60% of the weighted average retail selling price of cigarettes released for consumption. This excise duty must not be less than €90 per 1 000 cigarettes irrespective of the weighted average retail selling price. EU countries which impose an excise duty of at least €115 per 1000 cigarettes are not required to comply with the 60% condition. Certain countries (Bulgaria, Estonia, Greece, Latvia, Lithuania, Hungary, Poland, Romania and Croatia) were allowed a transitional period until 31 December 2017 to adapt to these conditions.
  • When an EU country increases the rate of VAT on cigarettes, it may reduce the overall excise duty up to an amount which, expressed as a percentage of the weighted average retail selling price, is equal to the increase in the rate of VAT. However, the EU country in question must raise the excise duty again so as to reach at least the original level by 1 January of the second year in which the reduction took place.

Rules applying to manufactured tobacco other than cigarettes

  • EU countries shall apply an excise duty to manufactured tobacco other than cigarettes, which may be:

    • an ad valorem duty calculated on the basis of the maximum retail selling price of each product;
    • a specific duty expressed as an amount per kilogram or per 1000 pieces;
    • a mixture of an ad valorem element and a specific element.
  • The overall excise duty must be at least equivalent to the rates or minimum amounts established for:

    • cigars or cigarillos: 5% of the retail selling price or €12 per 1000 items or per kilogram;
    • fine-cut smoking tobacco intended for the rolling of cigarettes: 46% of the weighted average retail selling price or € 54 per kilogram; these minimum rates will gradually increase, by 2020, to 50% or €60;
    • other smoking tobaccos: 20% of the retail selling price or €22 per kilogram.

Maximum retail selling price

Manufacturers, their representatives or authorised agents in EU countries, and importers of tobacco from non-EU countries have the right to determine the maximum retail selling price for each of their products for each EU country in which the products concerned are to be released for consumption. This does not however affect the implementation of national legislation regarding price control or the observance of imposed prices, provided that they are compatible with EU legislation.

FROM WHEN DOES THE DIRECTIVE APPLY?

It has applied since 1 January 2011. Directive 2011/64/EU codifies and replaces Directives 92/79/EEC, 92/80/EEC and 95/59/EC (and their subsequent amendments).

BACKGROUND

For more information, see:

KEY TERMS

Ad valorem: a duty that is linked to the value of the product in question.
Weighted average retail selling price: calculated in accordance with the total value of all cigarettes released for consumption, based on the retail selling price including all taxes, divided by the total quantity of cigarettes released for consumption.

MAIN DOCUMENT

Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco (codification) (OJ L 176, 5.7.2011, pp. 24-36)

last update 05.12.2017

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