E Liquids tax 2024: How expensive will vaping be? 0

Liquids tax 2024: How expensive will vaping be?

In Germany, the Tobacco Tax Modernization Act (TabStMoG) aims to tax e-liquids in the same way as tobacco products. It does not matter whether the product contains nicotine or is nicotine-free. This update was already decided within the last grand coalition of the CDU/CSU and SPD. The new law is effective from July 2021. Liquids produced before the special tax increase on tobacco products came into force could still be sold tax-free until the beginning of 2023. After the introduction, the tax on all liquids needed for vaporization was 16 cents per milliliter. At the turn of 2023/24, this amount will now increase as planned in the next step.

Vape Juice tax 2024: increase in costs

The tax covers all liquids needed for vaping using e-cigarettes (or e-hooks). From ready-made e-liquids and longfills to nicotine shots and base - the price of each of these products will be related to tax increases in the new year.

From January 1, 2024, the tax will increase to 20 cents per milliliter. For a bottle of liquid containing 10 ml of liquid, tobacco tax is 2 euros. By the way, this is the so-called "excise tax", which means that vapers pay this amount plus the manufacturer's stated price of the product.

Here is an example of the calculation:

For example, the liquid currently costs 5 euros. This adds €1.60 net tax - currently €1.91 gross. Final price €6.91.
From January 1, 2024, it will be EUR 2.00 net tax, which in the future will result in EUR 2.38 gross. Final price: €7.38

Due to the increase in tax on tobacco products, manufacturers now expect higher production costs. Important ingredients such as vegetable glycerin (VG) and 1,2-propanediol (PG) must be taxed in the same way as ready-made e-liquids. The actual cost of vaporization liquids in 2024 cannot yet be predicted with 100% certainty, but it is doubtful whether it will be cheaper.

By the way: Unfortunately, the liquid tax also applies to the private purchase of these basic ingredients, provided they are intended for producing your own liquids and vaping them. Such a practice could, in addition to the known health risks of such a “house mix”, also result in charges of tax evasion, so we strongly advise against it.

In Poland, due to the amendment to the Act on Excise Duty passed by the Sejm on December 1, 2022 (Act amending the Act on Excise Duty and certain other acts - Sejm Paper No. 2764). a new wording was added to the excise definition of liquid for electronic cigarettes (commonly called "liquid"). By the will of the Polish legislator, at the beginning of February 2018, it became a product subject to excise tax. The current definition of these products raises numerous controversies and is a source of frequent disputes with tax administration authorities. Will legislative changes solve the problems arising in this context from 2023? The new horizontal excise directive is to enter into force on February 13, 2023, and the above-mentioned the amendment to the Polish Excise Duty Act, which introduced a new definition of liquids, is to enter into force on January 1, 2023.

Definition of liquid for electronic cigarettes. What are the current doubts about?

The definition of liquid for electronic cigarettes is set out in Art. 2 section 1 point 35 of the Act of December 6, 2008 on excise duty (Journal of Laws of 2022, item 143, as amended). In the current legal status, liquid for electronic cigarettes is understood as a solution intended for use in electronic cigarettes, both with and without nicotine, including a base for this solution containing glycol or glycerin.

Based on this definition, practical problems have arisen regarding the possibility of qualifying as a liquid not only the final product, but also the individual ingredients (components) of the final mixture (liquid) used in e-cigarettes, in particular only the flavor or pure glycerin or propylene glycol, which as a consequence, it would lead to these products being subject to excise duty. These doubts have become the subject of numerous applications for the issuance of interpretations of individual tax law provisions.

The Director of the National Tax Information (DKIS) presents an unfavorable position for taxpayers in this respect (e.g. Individual Interpretations: of December 2, 2021, No. 0111-KDIB3-3.4013.265.2021.1.JS; of November 19, 2021, No. 0111 -KDIB3-3.4013.230.2021.1.JS). In the DKIS assessment, the criterion for recognizing aroma, concentrate, glycol, glycerin and their mixtures as e-cigarette liquid is what the product is actually intended for or will be intended for, regardless of whether they are directly used in e-cigarettes or only in combination with other ingredients. As DKIS emphasizes, the legislator's intention was to cover all products that are ultimately intended for users to "consume" in an electronic cigarette, including the bases used to compose these liquids. Consequently, an entity that produces (manufactures, processes or fills) products intended for use in electronic cigarettes, or that offers them for sale as a liquid for electronic cigarettes or as a semi-finished product for the further production of such a liquid, intends them to be used as a liquid. to electronic cigarettes, which determines the need to treat them as excise goods. According to the tax authority, it does not matter that the flavors themselves, glycol or glycerin cannot be poured directly into an e-cigarette to achieve the expected effect of an electronic cigarette.

This is also the view that dominates in the judiciary. The rulings approving the DKIS position emphasize that a liquid for electronic cigarettes is any solution intended for use in electronic cigarettes. However, the provision does not require that the possibility of its final use, i.e. pouring directly into an e-cigarette, determines whether a solution is considered a liquid intended for electronic cigarettes. In other words, the term "liquid for electronic cigarettes" should be understood not only the finished (final) product, with or without nicotine, intended for use in electronic cigarettes, but also the products used to produce it, provided that they fall within the scope of statutory definition, as a solution intended for use in electronic cigarettes (see the judgments of the Provincial Administrative Court: in Kielce of June 9, 2022, I SA/Ke 41/22; in Gorzów Wielkopolski of March 24, 2022, I SA/Go 39/ 22; in Bydgoszcz of March 29, 2022, I SA/Bd 40/22).

A different position on this issue was taken by the Provincial Administrative Court in Kraków in its judgment of March 29, 2022 (I SA/Kr 121/22). It found that pure propylene glycol and pure glycerin purchased by consumers who use them to produce liquid for electronic cigarettes should not be subject to excise duty. In the opinion of the Court, glycerin and propylene glycol are substances, not solutions, due to their physicochemical properties. Glycol and glycerin alone are not suitable for use in e-cigarettes because consumers do not heat glycerin or glycol, but only after adding other ingredients (e.g. nicotine or flavors) do they compose cigarette liquid themselves and finally pour it into e-cigarettes .

Tax interpretations are a tool for avoiding taxation

A particularly disturbing phenomenon, not only for the fiscal interests of the State Treasury, but also for the security of economic transactions, is tax avoidance, which involves hiding the actual production or sale of liquids for electronic cigarettes. In practice, situations of apparent sale of specific products, such as fireplace aromas or air fresheners, are not uncommon. In fact, due to their physicochemical composition and properties, these products can be directly used in e-cigarettes as a component of liquid for this type of products and are used by buyers for this purpose. This phenomenon clearly violates the principles of fair competition, putting at a disadvantage entities that reliably declare the production or sale of the excise goods in question and settle the excise duty due on this account. At the same time, it cannot be ignored that the entities carrying out the described procedure often obtained favorable interpretations by presenting in their conclusions a factual state that was contrary to reality.

What will change?

Noticing the emerging doubts regarding the definition of liquid for electronic cigarettes and the related phenomenon of tax avoidance, the Ministry of Finance decided to make a legislative correction in this area. In the light of the amending Act (which in this respect is to enter into force on January 1, 2023), liquid for electronic cigarettes means a solution intended for use in electronic cigarettes, both with and without nicotine, including the base for this solution containing glycol or glycerin. A solution is considered intended for use in electronic cigarettes when it is used or, due to its composition and physicochemical properties, can be used in electronic cigarettes, regardless of the place where it is sold or offered for sale.

The justification for the draft act emphasizes that this change is the result of experience gained during the operation of the current definition of liquid for electronic cigarettes and results directly from cases of tax avoidance identified by the National Tax Administration authorities. Products which, due to their raw material composition or the form of packaging, or finally the place of sale in specialized points, could be used directly as a liquid for electronic cigarettes or as a base for preparing this solution (e.g. aromas), were declared as e.g. aroma for fireplaces or air freshener. The draft amendment proposes to clarify the concept of "intended for use in electronic cigarettes", which is a key criterion for recognizing a given solution as a liquid for electronic cigarettes. The condition for qualifying a product as a liquid for electronic cigarettes will be its composition and physicochemical properties indicating the possibility of use in an e-cigarette, regardless of the place of sale or offering for sale. In the opinion of the drafter, the proposed change will enable the inspection and tax authorities to demonstrate that the seller of e-cigarette liquids indicated the purpose of these products for non-taxable purposes only for appearances.

The proposed changes do not solve current problems... and generate new ones

The proposal of the Ministry of Finance raised numerous objections during legislative work. This is, of course, related to the use of unclear (undefined) phrases in the proposed definition, or only the potential "possibility" of using a given product in electronic cigarettes, allowing the product to be considered an e-cigarette liquid. The provisions of the amending Act do not specify what conditions a given product must meet and what properties will be decisive for the classification allowing for the recognition that a given product meets the criteria for liquid for electronic cigarettes. Therefore, there is a risk of over-interpretation of the provisions and too much discretion of the tax authorities when assessing these criteria.

There is a concern that potentially any product with appropriate physicochemical properties enabling its use in electronic cigarettes may be considered an excise product. As a result, a product completely unrelated to the electronic cigarette market, but found, for example, in the cosmetics, chemical or food industries, may be classified as a liquid for electronic cigarettes. In particular, according to the proposed definition, the place of sale or offering of a given product will be irrelevant in this respect.

The question of whether only semi-finished products (e.g. glycol or glycerin) used to produce liquids for electronic cigarettes may be recognized as excise products also remains open. In this context, it is worth paying attention to the announcement of the Ministry of Finance published on December 1, 2022, aimed at explaining the new definition of liquid for electronic cigarettes. According to this announcement, "electronic cigarette liquid as a solution should be understood as a homogeneous mixture of two or more chemical compounds. Meanwhile, neither glycerin nor glycol are such mixtures. (…) the condition for qualifying a product as e-cigarette liquid will be its use or the possibility of such use in electronic cigarettes resulting from its composition and physicochemical properties. Individual components that do not constitute a solution or their composition and physicochemical properties do not indicate use in electronic cigarettes for effective consumption, such as glycerin or glycol alone, are not subject to excise tax.” It is easy to see that these explanations are not consistent with the currently dominant line of interpretation of tax authorities and administrative courts, which only confirms the concerns of companies from industries unrelated to the liquids market. Undoubtedly, an advantage is the direct indication in the Ministry's announcement that the production and distribution of propylene glycol or glycerin and their use, e.g. in the pharmaceutical, cosmetics, construction and automotive industries, will not be subject to excise duty.


Based on the above comments, one may be tempted to say that the proposed legislative changes regarding the definition of liquid for electronic cigarettes not only do not solve the existing problems, but also generate new ones. As is most often the case in such situations, only practice will show how effective the new wording of the provision will be in the fight against tax avoidance and what its actual scope of application will be. This legal uncertainty will probably contribute to the intensification of taxpayers' activity in submitting applications for individual interpretations of tax law provisions. In many cases, obtaining them seems to be necessary to secure the tax risk related to the business activity. As long as the protection obtained in this way by reliable taxpayers does not turn out to be illusory, and for dishonest entities these interpretations are not just a convenient tool facilitating tax avoidance.

What about E Liquids tax in Ireland?

Chris Macey from the Irish Heart Foundation recently stated that the Irish government is aware of the dangers vaping poses to children, and the best solution to this problem is higher taxation of the vaping industry, which will significantly reduce the number of vapers among children.

Some environmental groups are calling on the Minister to introduce such a solution and impose a tax of 10 cents per milliliter of e-liquid. Due to the fact that Ireland, which was the last country to start regulating the vape market in the EU, as exemplified by the recently introduced ban on the sale of vape products to people under 18 years of age, should not delay the introduction of a taxs on e-cigarettes.

So much for the approach to freedom. It turns out that glycerin and glycol, which are widely used in pharmaceuticals, have been subject to tribute in Germany, and similar measures are being considered in other countries. We can only hope that the Irish Government will approach this matter more sensibly.

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