Excise duty on tobacco and package labelling of tobacco products – VAT increase on 1 September 2024
The general VAT has increased to 25.5% as of 1 September 2024. Because of the increase in value added tax, the retail prices of tobacco products may need to be raised. The package labelling must comply with the actual retail price.
If it is practically impossible to correct a price label or text printed on a retail package due to the EU traceability regulation, tobacco products can exceptionally be released for consumption with labels or printed texts that are no longer accurate due to the VAT increase.
How to file and pay excise duty on tobacco
Excise duty on tobacco must be filed and paid based on the product's actual retail price, not based on a price label or printed text that is no longer accurate.
If the excise duty return for tobacco is not in line with the actual retail price, the return is erroneous. The taxpayer must correct the error in the excise duty return by submitting a correction return for the tax period in question. The return must be corrected if too much or too little tax has been paid. It is also worth noting that tobacco products that were previously subject to minimum excise duty (product groups) can be included in other product groups in future due to an increase in the retail price.
The Tax Administration may request clarification from you afterwards. It is therefore advisable to store any associated information together with the accounting materials, for example.
The guidance enters into force immediately
This guidance enters into force with immediate effect and applies to tobacco products that already had a price label or text printed on the retail packages when this guidance was issued. The guidance is in force as long as products whose price labels or printed texts are inaccurate because of the VAT increase are released for consumption. The guidance applies only to excise duty on tobacco.
The VAT increase may affect the selling price of tobacco products – however, it may be impossible to change the package labelling
The general VAT rate will rise to 25.5% on 1 September 2024. The Parliament approved the increase in value added tax at its plenary session on 28 June.
Because of the increase in value added tax, the retail prices of tobacco products may need to be raised. Together with other regulations, the legal amendment regarding VAT may also have an indirect impact on the actual ability of tobacco operators to comply with the obligation laid down in the act on the excise duty on tobacco (1470/1994) to ensure that before the products are released for consumption, they are provided with price labels or texts printed on retail packages to indicate the actual retail price on which the excise duty on tobacco is based.
The retail price at which the product is actually sold to the consumer and on the basis of which the excise duty on tobacco is filed and paid is indicated in the price label or printed on the retail package. If tobacco products are to be sold at a retail price that is higher than what is indicated in the price label or printed on the package, the labelling must, as a rule, be changed to comply with the actual retail price.
However, the Tax Administration has been informed that it may be practically impossible to change the package labelling by 1 September 2024 due to the EU traceability regulation.
The temporary guidance issued by the Tax Administration concerns a special situation related to the increase in the standard VAT rate in which the taxpayer is releasing such products for consumption that already have a price label or text printed on the retail package that cannot be changed to match the new retail price because of the EU traceability regulation.