Taxation and Customs Union

Excise Duties on Tobacco

EU legislation on excise duties for manufactured tobacco defines:

  • the categories of manufactured tobacco products (cigarettes and “other tobacco products”)
  • the principles of taxation
  • the minimum rates and structures to be applied.

Manufactured tobacco is also subject to the common provisions for excisable goods under EU law.

Cigarettes

Directive 2011/64/EU requires Member States to levy a minimum rate of excise duties on cigarettes.

This minimum rate must consist of:

  • A specific component of between 7.5% and 76.5% of the total tax burden (TTB) - expressed as a fixed amount per 1000 cigarettes
  • An ad valorem component - expressed as a percentage of the maximum retail selling price

In addition, the overall excise rate must be:

  • At least EUR 90 per 1000 cigarettes
  • At least 60% of the weighted average retail selling price

Member States that apply excise duty of EUR 115 or more, however, do not need to comply with the 60% criterion above.

How it works: Sample calculation for pack of 20 cigarettes


Retail Selling Price (excluding taxes) EUR 0.7
+ Excise duty - specific: EUR 1.0
+ Excise duty - ad valorem: EUR 0.8 (27% of RSP)
Total excise duty: EUR 1.8 (60% of RSP)
= Price (excluding VAT) EUR 2.5
+ VAT 20% EUR 0.5
= Retail Selling Price (including all taxes) EUR 3.0

EU legislation only sets harmonised minimum rates. Member States are free to apply excise duty rates above these minima, according to their own national needs.

Specific provisions exist to allow Portugal to apply a reduced rate up to 50% less than the required overall minimum excise duty on cigarettes consumed in the most remote regions of the Azores and Madeira.


Other tobacco products

Directive 2011/64/EU also sets down minimum excise duty rates for manufactured tobacco other than cigarettes.

The structure for taxing "other tobacco products" is slightly different than for cigarettes.

Member States can choose between applying a specific component or an ad valorem component, or if they wish, they may apply a mixture of the two.

Minimum rates are set out for three distinct categories of "other tobacco products"


Product Category Minimum Rate
Fine-cut smoking tobacco 48% of the weighted average retail selling price*
Or
EUR 60 per kilogram*
Cigars and Cigarillos 5% of the retail selling price
Or
EUR 12 per 1000 or per kilogram
Other smoking tobaccos 20% of the retail selling price
Or
EUR 22 per kilogram

* To gradually increase, by 2020, to 50% or EUR 60

 

Background information and related links