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Excise duty refund on diesel for road transport: publication of new refund rates


Traditionally, for tobacco products, “smoking” (by whatever means) comprised the existence of combustion and the subsequent inhalation of the smoke caused by this action. It is in this sense that technical Directive 2014/40 on the approximation of the legal, regulatory and administrative provisions of the Member States relating to the manufacture, presentation and sale of tobacco products, continues to bind, despite its recent revision, “smoking tobacco products” with combustion, by specifying, in section 9) of article 2, that said products must be distinguished from those that do not involve combustion, and giving as an example of the latter, in section 5 ), chewing tobacco, nasal tobacco, and oral tobacco.

Until a few years ago, combustion and inhalation, were indisputable not only in the aforementioned law, but also in the fiscal one relating to excise duties, Directive 2011/64, where clearly all classic products (cigarettes, cigars, fine-cut tobacco...) complied with such requirements, and where tobacco used in another way, such as mentioned in section 5) of Directive 2014/40, was left out of the tax. However, the increase in the price of commonly smoked products and the recommendations and prohibitions of health regulations, that discourage their consumption, have caused a slow but obvious replacement of traditional tobacco products with new ones, among which two stand out: the so-called “electronic cigarettes” and “heated tobacco”.


The legislator of 2014 was already aware of the growing importance of electronic cigarettes, and that is the reason why they were expressly included amongst the definitions of article 2 of Directive 40,  section 16 of which indicates that for “electronic cigarette” must be understood “‘a product that can be used for consumption of nicotine-containing vapour via a mouth piece, or any component of that product, including a cartridge, a tank and the device without cartridge or tank”, adding that “Electronic cigarettes can be disposable or refillable by means of a refill container and a tank, or rechargeable with single use cartridges”.

Besides, Directive 2014/40 was later modified by Directive 2022/2100, of June 29, to make express reference (article 7.12) to “heated tobacco”, including it in the definition of “novel tobacco product” (article 2, section 14), and justifying such a decision for the fact that a “substantial change in circumstances” had occurred, according to a Report published by the European Commission. This Report provided information on market developments, showing an increase in the sales volume of heated tobacco products of at least 10% in at least five Member States.

It so happens that these two products completely move away from the notion of “smoking” existing in the past, which has become obsolete, and which in recent times has been extended in technical Directive 2014/40. If we say they “move away” it is because they involve the action of heating, which is different from combustion. In this regard, it is convenient to emphasize that while heating occurs at about 300-350º C, combustion takes place from 800/1000 º C. This is an important differential fact, but there is also another significant one: in the case of the electronic cigarette, what is heated by means of a battery, is no longer a solid, but a liquid containing nicotine that is vaporized and inhaled by the consumer, and in the heated tobacco, although true powdered tobacco does exist, it is impregnated with propylene glycol and glycerine, and  inserted into a mechanism heated by an electronic device. Nothing to do, therefore, with the traditional products. This novel nature of both devices has not failed to raise some doubts for legislators in different areas, (doubts already solved in the technical and health regulations, since the World Health Organization considered them harmful in a report released in March 2020).

The next question that we necessarily have to ask ourselves is what happens with tax regulations? In this regard, it is evident that excise rules have not followed the same process of adaptation to current circumstances. As a matter of fact, in its Evaluation Report of Directive 2011/64, of February 10, 2020, the European Commission fully recognized, from the first pages of said document, that “the current tax categorisation is inefficient as regards the treatment of ‘heated tobacco products’ and e-cigarettes”, and that “the fiscal treatment of these products with different rates and structures creates inefficiencies and legal uncertainty”, a situation implying that “The difficulties with the cross border movements of these products result in a malfunctioning of the internal market”.


According to this Report, confusion and chaos are manifest in the case of “heated tobacco” by the fact that, while certain EU Member States have created a specific tax, others include it in the category of “other smoking tobaccos” and finally other non-EU countries, such as the United Kingdom, have regulated a specific category for said product, with the same tax rate as the fine-cut tobacco.

As for electronic cigarettes, most European countries have not established any tax for this product, although there is a specific and non-harmonized tax in the cases of Portugal, Italy, Poland, Sweden, and Finland. The consequence of the above is fragmentation and lack of harmonization within the European Union, which entails difficulties and obstacles in the internal market.

Taking into account these facts, the Report concludes that it is evident “the need to upgrade the regulatory framework to tackle new market challenges”. Such assertion is based in the following arguments: “For recent and new products, the lack of harmonisation is a source of concern from the internal market perspective. On the market side, developments have accelerated within new e-cigarettes, heated tobacco products and a new generation of modern products is coming into the market (containing nicotine or cannabis). In particular, the current scope of the Directive is not capable of providing for an explicit harmonised taxation regime for e-cigarettes and heated tobacco products. As a result, Member states have established some taxation on these products but with different structures. The current lack of harmonisation of the tax regulatory framework for these products is also restricting the possibility to monitor their market development and control their movements”.

However, Directive 2011/64 has not been modified in the four years passed after the Evaluation Inform of the EU Commission.

In this context, the Court of Justice of the EU has come to provide a solution, although limited to a single product: heated tobacco, in its recent judgement of 14 march 2024 (Case C 336/22), where, concerning the proceedings between the company “f6 Cigarettenfabrik GmbH & Co. KG” and the Hauptzollamt Bielefeld (Main Customs Office, Bielefeld, Germany) on the lawfulness of the supplementary tax, in addition to excise duty, applicable with effect from 1 January 2022 to heated tobacco manufactured by that company, declared in points 30 and 34 of the mentioned judgement that “Article 2(1) of Directive 2011/64, classifies as ‘manufactured tobacco’ cigarettes, cigars, cigarillos and smoking tobacco. The latter category includes, first, fine-cut tobacco for the rolling of cigarettes and, second, a residual category of ‘other smoking tobacco’.  Article 2(2) treats as cigarettes and smoking tobacco those products consisting in whole or in part of substances other than tobacco but otherwise conforming to the criteria set out, inter alia, in Article 5(1) of that directive”.


Having regard of these circumstances, the Court concluded that “It follows from the foregoing that, subject to the checks which it is for the referring court to carry out, the heated tobacco at issue in the main proceedings, in so far as it comes under the definition of ‘smoking tobacco’, within the meaning of Article 5(1)(a) and (b) of Directive 2011/64, is, as a manufactured tobacco covered by that directive, an excise good within the meaning of Article 1(1) of Directive 2008/118”.


Despite its relevant implications, this solution is just an interpretation of the law, and it is the law which should be changed, in order to avoid confusion and different legal treatment in the European countries, by expressly include both e-cigarettes and heated tobacco. In this sense, it is probable, but not sure, that the next evaluation, which should be carried out in the course of the present year, leads to a proposal of modification of the current EU Directive 2011/64.



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