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Tobacco Tax Evasion: Update on Aggressive Prosecution Practices in Germany

Tobacco Tax Evasion: Update on Aggressive Prosecution Practices in GermanyWe have been observing increased controls on tobacco deliveries by German customs for some time now. Companies that regularly transport tobacco to or through Germany still face the fear that customs will confiscate their merchandise and initiate criminal tax proceedings against all parties involved in the delivery and issue high tax assessments that must be paid immediately.

Tax-free raw tobacco or taxable smoking tobacco?

The reason for this is the legally blurred distinction between smoking tobacco and raw tobacco. Smoking tobacco and other tobacco products are taxable under the Tobacco Tax Act (TabStG). However, raw tobacco, i.e. uncut and unshredded tobacco from which smoking tobacco is obtained only through further industrial processing, is exempt from tobacco tax.

Despite a uniform European legal basis (Tobacco Tax Directive – 2011/64/EU), the national customs authorities handle the distinction between raw and smoking tobacco very differently. The German customs authorities have particularly strict standards, requiring only whole, untreated and unstripped tobacco leaves to be accepted as raw tobacco.

Criminal tax proceedings and back taxes threaten

Should the tobacco transport get into a customs control, the goods are usually confiscated, criminal tax proceedings are initiated against drivers and managers and a (high) tax assessment is issued. A fine can also be imposed on the company concerned under the Administrative Offenses Act. We have seen in extreme cases that customs confiscates the transport vehicle in addition to the goods.

Before transport: make arrangements with customs

Many sellers obtain written confirmation from their domestic customs authorities prior to transport that the goods to be shipped are indeed raw tobacco. However, the German customs authorities are generally not convinced by this and stick to their interpretation.

To be on the safe side, it is advisable to make individual arrangements with the responsible main customs office in advance or to transport the goods like smoking tobacco as a precaution. Our customs law attorneys will be happy to assist you in structuring all activities relating to raw and smoking tobacco in a legally secure manner.

Continue reading:
German Tobacco Tax: The Distinction Between Smoking Tobacco And Raw Tobacco Often Unclear
Advice on German Customs Law

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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