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German Tobacco Tax: The Distinction Between Smoking Tobacco And Raw Tobacco Often Unclear

Mar 9, 20 • Customs LawNo Comments
German Tobacco Tax: The Distinction Between Smoking Tobacco And Raw Tobacco Often Unclear

There is no clear distinction between raw tobacco and smoking tobacco.

The question of when tobacco is to be taxed continues to cause controversy in the EU. This causes a great deal of uncertainty and leads as well to contradictory decisions by authorities and courts.

German customs: almost everything is smoking tobacco

We have observed that German customs currently classifies virtually all tobacco products as taxable smoking tobacco. Dried tobacco leaves (often also sold as decorative or flavoring products) suffice to qualify for customs, because they can be made smokable by manual shredding or crumbling.

This usually has consequences for the shipper, the forwarding agent, the recipient and last but not least for the truck driver. Often, all parties involved are not only exposed to very high tax demands, even criminal proceedings for (serious) tax evasion and smuggling are initiated.

Raw tobacco or smoking tobacco?

In such proceedings, the tax courts have to examine whether the tobacco in question is actually tax-free raw tobacco or taxable smoking tobacco. However, the Federal Fiscal Court has yet to issue a Supreme Court ruling on this question.

We believe that the broad understanding of the customs authorities as to which tobacco products are taxable is incorrect for various reasons. In some cases, we have also been able to convince the customs officials responsible that they have misclassified the tobacco products.

Criminal courts decide differently

While the customs authorities and the financial courts are responsible for the taxation procedure, the criminal courts must examine the facts of the case on their own responsibility in the criminal proceedings. It is therefore not surprising that divergent decisions are often made in this area.

The Hagen Regional Court, for example, passed a decision on August 31, 2019 (71 Qs 16/18) that unfermented tobacco that can be made smokable by manual shredding does not constitute smoking tobacco and is therefore tax-free. The public prosecutor’s office and the customs authorities took a different view. It is questionable, however, whether this view can also be enforced before the tax courts.

Problem: Tobacco tax in Shisha bars

Customs currently intervene at all levels: Not only tobacco transports, tobacco vendors and buyers, but also shisha bars are currently affected. These bars usually blend different types of tobacco anew for their customers and add flavors. This usually results in a new tobacco tax debt. If the tobacco is not sold in packages with tax stamps (banderoles), this usually constitutes tax evasion by all parties involved.

Clarify uncertainties beforehand

Given the current uncertainty, those affected should consider an individual approach in advance to avoid difficulties. In practice, satisfactory individual solutions can currently be found in most cases. Sometimes the establishment of a tax warehouse can also help.

Our experience shows, however, that with regard to tobacco tax, a proactive approach is much more sensible and cost-effective than dealing later with customs and additionally with the public prosecutor’s office. Our experienced attorneys will be happy to assist you in this process.

Continue reading:
Tobacco Dealers, Watch Out! Customs Authorities are Taking Drastic Measures!
German customs law for import and export companies

Stefan Winheller

Attorney Stefan Winheller has specialized in tax law for about 20 years, especially in the areas of cryptocurrencies, foundations/nonprofits and international tax law.

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