Slovak Financial Law News 2004

New Act on Tobacco Products Excise Tax

Act No. 106/2004 Coll. on Excise Tax on Tobacco Products

The new Act on Excise Tax on Tobacco Products (the ``Act'') fully repeals and replaces the previous Act No. 312/1993 Coll. on Excise Tax on Tobacco and Tobacco Products as amended and also related Regulation of the Ministry of Finance of the Slovak Republic No. 313/1993 Coll. on Labelling of Certain Tobacco Products with Control Stamps as amended.

The aim of the new Act is to implement into the Slovak legislation in force the provisions of the principal Council Directive 92/12/EEC on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, which is reflected by the introduction of a mechanism for the operation of tax warehouses, authorized recipients and related tax suspension and quarantee of tax payment, in the monitoring system of movement of the products through circulation of an accompanying document, consistent keeping of registers which enable monitoring of production, import, export, movement and consumption of tobacco products, with the aim to minimalise possible tax avoidance.

The Act regulates that tobacco products are subject to excise tax within the tax territory which is considered to be the territory of the Slovak Republic.

The subject of tax includes tobacco products produced in the tax territory, supplied to the tax territory from any other Member State of the European Union, or imported into the tax territory from a third country. The term ``tobacco products'' shall mean, for the purposes of this Act, cigarette, cigar, cigarillo and tobacco which are further defined in Section 4 of this Act.

Tax administration is carried out by the customs office. Territorial jurisdiction of the customs office shall be governed by the registered office in case of a legal entity, or the permanent residence in case of a natural person.

The tax base is the quantity of tobacco products expressed in pieces or kilograms with the exception of cigarettes. As regards cigarettes, the tax base is the number of pieces of cigarettes in a consumer packet of cigarettes and the price of cigarettes stated on the control stamp. The tax on tobacco products, except for cigarettes, shall be calculated as a multiplication of the tax base and particular tax rate. The tax on cigarettes shall be calculated as a sum of the specific part of tax and percentage part of combined tax rate.

The tax rate on tobacco products, except for cigarettes, is stipulated as follows: (a) cigars, cigarillos SKK 1.40/piece, and (b) tobacco SKK 1,350/kg.

The tax rate on cigarettes (combined tax rate) is stipulated as follows: SKK 0.91/piece plus 20% of the price of cigarettes. The minimum tax rate on cigarettes shall be SKK 1.40 per one piece.

Unless the Act stipulates otherwise, the tax liability arises by release of tobacco products for tax free circulation.

The taxation period is essentially one calendar month. If a warehouse operator or so-called authorized recipient, who repeatedly receives tobacco products within his/her business activities in the course of tax suspension from any other Member State of the European Union, is a tax debtor, he/she shall be obliged to file a tax return to the customs office no later than 25th day of the calendar month following the month in which the tax liability arose and to pay the tax within the same period. He/she shall be obliged to file a tax return also for the taxation period in which no tax liability arose to him/her. Other tax debtors shall be obliged to file tax returns to the customs office within three business days following the date when the tax liability arose and to pay the tax within the same period, unless the Act stipulates otherwise.

The Act also regulates conditions for exemption of tobacco products from tax, tax refund, marking of a consumer packet of cigarettes with a control stamp and it also defines several important terms, such as an enterprise for production of tobacco products, tax warehouse, warehouse for tobacco products, authorized recipient and tax representative.

The term ``enterprise for production of tobacco products'' shall mean, for the purposes of the Act, a territorially bounded place situated within the tax territory (in the Slovak Republic), equiped with particular technological equipment designated for production of tobacco products, in which tobacco products are produced, processed, stored, received or dispatched within its business activities.

The Act also regulates in detail the issues related to the transfer, import and export of tobacco products as well as the issue of forwarding business with tobacco products.

The customs office may impose a penalty on a legal entity or natural person for breach of its duties under the Act on Excise Tax on Tobacco Products up to SKK 100,000, or a penalty up to the amount of tax pertaining to the quantity of dispatched tobacco products.

This Act came into force on 1 March 2004, save for certain provisions which became effective on 1 May 2004.

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