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GERMANY

Tax reduction for tobacco products

24 Jun 2020. To revive the German economy the government plans to reduce the VAT rate from 19 to 16 per cent for a limited period between 1 July and 31 December this year. The tax reduction also applies to tobacco products, DTZ reports.

After disagreements it is now clear that the temporary tax reduction to 16 per cent will also apply to tobacco products. For the period from 1 July to 31 December, the current rate of 19 per cent will only be used to calculate the minimum tax. This applies to cigarettes, cigars, cigarillos and fine cut. With this solution, the “Second Corona Tax Assistance Act” should help to avoid extensive repricing and the inevitable purchase of new revenue stamps, the report said.

Experts assume that the tax savings due to the price fixing will remain with the retailers. Practically nothing is likely to change for the consumer.

On 29 June, the law should also pass the Bundesrat after readings in the Bundestag.