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Tax alert no. 11– Concept of “cigars or cigarillos” - Judgment of The Court in Case C 638/17 Skonis ir kvapas UAB

In this issue: Concept of “cigars or cigarillos”

Judgment of The Court in Case C‑638/17 Skonis ir kvapas UAB

Do rolls of tobacco with an outer wrapper of natural tobacco partially covered by an additional paper layer fall within the category of cigarillos or cigarettes, within the meaning of article 4 paragraph (1) letter a) of Directive 2011/64/EU?

 

Facts of the case – In a nutshell

 

During September - April 2015, Skonis ir kvapas imported into Lithuania tobacco products. More precisely, rolls of tobacco with an outer wrapper of natural tobacco partially covered by an additional paper layer. From an excise taxation perspective, they were declared as falling within the category of cigars or cigarillos. 

The Lithuanian tax authorities took the view that such products should have been treated as cigarettes which were subject to higher rates of excise duties. As a consequence, they imposed additional excise duties towards the company. The decision was appealed by the Company and the Tax Litigation Commission disposed its annulment.

The referring court, before which the Lithuanian Tax Authorities brought an appeal, considers that the outcome of the dispute turns on the interpretation of Article 4(1) of Directive 2011/64.

In the end, The Court ruled out that tobacco products part of whose outer wrapper of natural tobacco is covered, at the filter, by an additional paper layer fall within the category of cigars or cigarillos even though such products are visually similar to cigarettes.

 

How does the ruling impact your company business?

If you import rolls of tobacco with an outer wrapper of natural tobacco partially covered by an additional paper layer (visually similar to cigarettes), from an excise duties perspective, you should include them in the category of cigars or cigarillos and not cigarettes. Currently in Romania, products falling under the category of cigars and cigarillos are subject to an excise duty lower than the one applicable to cigarettes.

 

Prepared by:
Cristina Galin, Senior Manager, Indirect Tax

 

For additional information, please contact:

Alex Milcev, Partner – Head of Tax&Legal

 

Ernst & Young SRL

Bucharest Tower Center Building,

22nd Floor, 15-17 Ion Mihalache Blvd.,

Sector 1, 011171, Bucharest, Romania

Tel: (40-21) 402 4000, Fax: (40-21) 310 7124

Email: office@ro.ey.com

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