Compliance Category: Other applicable taxes

Introduction of the ‘plastic tax’

2023 is experiencing an exponential rise in Environmental, Social and Government (ESG) taxes. As the name suggests, these taxes have a marked agenda: to further wider ecological and conservation affairs.  This year has already seen both Poland and Germany establish their own vision for implementing ESG taxes. Predictably, this phenomenon is set to permeate neighboring countries on the continent.  

Netherlands is the latest country to announce its own initiative in this regard.  

From 1 July 2023, residents must pay an extra amount for single-use disposable containers that include plastic. This measure will be extended yet further from 1 January 2024, where disposable cups and containers that contain plastic will be prohibited.  

These measures hold the obvious benefit of increasing recycling and nurturing positive environmental behaviors.  

The growth of ESG taxes is set to become an integral part of Kofax’s compliance and development plans and feature alongside country e-invoicing mandates and VAT rate changes. Each ESG tax is unique and merits its own considerations. Kofax is acutely aware of the significance of ESG taxes and the associated obligations they place on suppliers and buyers. Kofax is committed to considering its responsibilities in respect of any ESG taxes, if applicable.  

Carbon Border Adjustment Mechanism (CBAM) draft law

Kofax has been following progress relating to the Carbon Border Adjustment Mechanism (or CBAM). You can read more about how the intended legislation works, and the motivations behind it, in our recent post here.  

Progress with regards to implementation appears to be on schedule. The European Commission to this effect issued the draft version of the Implementing regulation with respect to CBAM. 

The draft law includes extensive information, including: 

  • Reporting obligations in respect of CBAM 
  • Specific obligations during the transitional period  
  • Guidance relating to specific materials subject to reporting obligations 

The report is detailed and comprehensive. Further information can be sought via the following link:  

EUR-Lex – Ares(2023)4079551 – EN – EUR-Lex (europa.eu) 

Introduction of the Einwegkunststofffondsgesetz (plastic tax)

As increasing awareness of environmental and conservation issues continues on an upward trajectory, countries are reflecting this consciousness into their own regulatory and legislative frameworks.   

 Following the path of the United Kingdom, Spain and Poland, who have either already implemented or are in the process of implementing plastic tax initiatives, Germany is the latest country to enact a similar measure. On 15 May 2023, the German government published Einwegkunststofffondsgesetz (otherwise referred to as the Single-Use Plastic Fund Act). As the name suggests, the Act aims to curtail the use of single-use plastic, by imposing a levy on producers, sellers and importers of single-use plastic.   

The tax is expected to go live on 1 January 2024, although the first plastic tax declaration is expected in May 2025. This means companies must start collating data on single-use plastic usage from 1 January 2024.   

 Though superficially united in terms of their aims- to reduce the use of single-use plastic- plastic taxes in different countries operate very differently on a practical level. Plastic taxes may or may not form part of the taxable basis; they may or may not need to be included on an invoice; they can be negotiated between the buyer and seller or must be charged to the buyer, depending on specific country specifications. Today, Kofax can accommodate the UK and Spanish Plastic Tax. We are currently analysing further details in respect of the plastic tax in Germany and will consider our obligations in respect of it.  

 

Carbon border adjustment mechanism – CBAM (other taxes)

Our post in December 2022 commented on the Carbon Border Adjustment Mechanism (otherwise referred to as CBAM), which expresses a markedly environmental agenda by taxing carbon emissions of specific goods. The CBAM implementation timeline is now taking pace, with the European Parliament adopting legislative rules in respect of the CBAM in April 2023. A transitional phase is expected to begin from 1 October 2023.

The transition phase will impose some specific obligations on EU importers- specifically, EU importers of goods covered in the scope of the CBAM regulations will be required to submit quarterly reports of any emission to the European Commission.

Currently, carbon-intensive sectors such as aluminium, cement, iron and steel, fertilizers, hydrogen and electricity are covered by CBAM. It is however forecast that CBAM will be extended in the coming years to all products covered by the EU Emissions Trading System (ETS), vastly extending its scope.

The effects of CBAM have the potential to be profound. It will be intriguing to see whether increased costs associated with carbon usage will dictate more conventional fuel usage in an era where environment and conservation awareness continues to expand.

Single Use Plastic Directive

If tax rate changes are also becoming more visible today, tax rate changes pertaining to a distinctly environmental agenda are also becoming a more integral feature in the regulatory framework across Europe.

Poland is the latest country to mark a Single-use Plastic directive (SUP) as part of its wider fiscal infrastructure- which, as the name suggests, is motivated to prevent the use of single-use plastic. The rules are expected to have wide-reaching effects, with the Act effectively banning specific types of plastic on the market. In effect, a ‘plastic tax’ will be introduced for entities who sell single-use products to consumers. Fees for contravening these rules are expected. The Act is expected to take effect from 1 July 2024.

Tungsten Network will review is obligations in respect of the tax. The Act has been passed in Parliament, and the president signed the law implementing the EU directive on single-use plastic in April 2023.

Plastic Packaging Tax (PPT) increase

Tungsten analysed the Plastic Packaging Tax (PPT) in April 2022, when Her Majesty’s Revenue and Customs (HMRC) introduced PPT as an optional requirement on a UK invoice.  PPT in the UK is usually negotiated between the supplier and buyer- in stark contrast to Spain’s Plastic Packaging Tax, where suppliers are obligated to charge the PPT to their buyers. Tungsten can support PPT in both Spain and the UK today. 

From 1 April 2023, a full year on since its inception, PPT will be increased to £210.82 per tonne. There are no known plans now to make PPT a mandatory element of a UK invoice.  

Please refer to the HMRC website for further information.  

Single-use plastic levy

Germany is the latest country this month to advance a distinctly environmental agenda, following in the footsteps of the United Kingdom and Spain, and more recently, Scotland, via the Deposit Return Scheme.  

Expected in the first quarter of 2025, the legislation in Germany outlines the scope, refunds and penalties associated with such a levy, which, as the name suggests, applies to single-use non-recyclable plastic. 

The legislation has passed through the Federal Parliament and is awaiting approval in the Federal Council. 

Tungsten will monitor progression of the tax and consider its obligations in respect of the levy. 

 

Deposit Return Scheme

The UK Plastic Packaging Tax, introduced in April 2022, showcased the UK’s initiative to deploy fiscal policies to serve the wider environmental agenda.   

More specifically to the north of the country, Scotland is now planning to introduce a Deposit on Returned single-use containers Scheme (DRS).   

The scheme will apply to single-use drinks containers. On purchase, a small deposit will be paid (20p), which will then be returned once the empty bottle or can is returned, thus incentivising the need to recycle.   

While seemingly simplistic, there are more complicated fiscal elements which need to be considered as part of the scheme, specifically, the VAT element associated with the scheme. Questions raised include the need to consider whether the extra charge will also need to consider VAT- or whether VAT will only become relevant if the original container was subject to VAT.  

We are expecting further clarification from Her Majesty’s Revenue and Customs (HMRC) in the Spring Budget but as per current timeframes, the scheme is set for an implementation date of August 2023.   

Tungsten will monitor requirements in respect of the scheme and consider our obligations in respect of it.  

Guidance relating to single-use packaging tax

One of the most discerning observations of the past year has been the sharp increase in the deployment of environmental taxes. Through the taxation of elements that contribute to the proliferation of environmental issues that impact society today, the underlying objective of these taxes is ultimately the improvement of ecological affairs. This is a stark example of how countries can exploit fiscal measures to serve wider societal agendas. 

More recently, the United Kingdom and Spain have introduced a Plastic Packaging Tax (PPT). Portugal is the latest country to propose a similar initiative.  

Portugal has recently published guidance relating to a contribution required on single-use packaging made of either plastic or aluminium (or a combination of the two). This is expected to apply on read-to-eat meals and takeaways.  

The tax was initially expected to come into effect on 1 January 2023 but has been delayed until September 2023.  

Tungsten will follow developments in relation to the tax and assess whether we can support the upcoming tax in Portugal.  

Postponement of the Plastic Packaging Tax (PPT)

Italy – postponement of the Plastic Packaging Tax (PPT) (other taxes) 

The draft Budget Law 2023 in Italy has indicated that the Plastic Packaging Tax (PPT) will be postponed from 1 January 2023 to 1 January 2024. 

Tungsten is accommodating the Plastic Packaging Tax in Spain, which commenced on 1 January 2023. We will keep you updated with any developments with the PPT in Italy, if implemented. 

Carbon border adjustment mechanism

Multiple countries internationally have been reviewing their fiscal policies with a view to advancing specific environmental agendas. This has been an evident global trend during 2022 and we expect this to continue in 2023.  

Europe is no exception.  

On 13 December 2022, a provisional agreement to implement an EU Carbon Adjustment Mechanism, which would be effective from 1 October 2023, with plans for a transition period, was proposed. The European Commission will look to spearhead the programme.  

The mechanism would operate by applying a price on emissions relating to a wide range of goods. The underlying aim behind the proposal appears to be to reduce carbon leakage.  

Tungsten will follow any developments in relation to the implementation of the proposed carbon border mechanism.  

Introduction of Plastic Packaging Tax (PPT)

We wanted to remind you that Spain’s Plastic Packaging Tax (PPT) is due to go live on 1 January 2023. 

PPT in Spain is an excise duty imposed on non-reusable plastic packaging. It is levied on the manufacturing, intra—EU acquisition and importation of such packaging.   

PPT in Spain will be charged at 0.45 Euros per kilogram.  

PPT in Spain forms part of the taxable basis- this means that PPT will also be subject to VAT.  

Suppliers are legally obliged to charge the tax, if applicable, to buyers. This means suppliers must communicate the amount of non-recycled plastic, any associated PPT and details of any exemptions, where applicable, to buyers.  

Supplies, along with associated PPT, can be included in invoices- but this information can also be provided via a certificate in place of an invoice.   

We are pleased to confirm that Tungsten has integrated the Plastic Packaging Tax as part of its service offering to our Spanish customers. Both our Web Form Suppliers and Integrated Suppliers can now successfully facilitate the inclusion of PPT in their invoices. We are communicating with our Spanish market in respect of the change.  

Please refer to Law 7/2022 for further information around PPT in Spain.

VAT on foreign digital service providers

The Dominican Republic has proposed an 18% tax for foreign digital service providers, following a consultation in August. This follows an increasingly prevalent global trend, where an increasing number of countries are proposing or implementing a tax on foreign digital service providers.

The Bill will now pass to the Chamber of Representatives for consideration

Introduction of the plastic tax

Multiple countries are enacting legislation with a distinctly ‘green’ agenda. More recently, this year in April 2022 we oversaw the introduction of the plastic tax in the United Kingdom.

Italy is enacting similar legislation with the introduction of the plastic tax on 1st January 2023.

In many respects analogous to its UK counterpart, it aims to incentivise the use of recycled plastic.

The below provides a summary of the main changes:

  • The tax applies to manufactured products for single use (MASCI)
  • All plastic is included with some exceptions (including compostable plastics, recycled plastic and plastic used for medical ends)
  • As in the UK, the tax is not set as a fixed percentage but will be charged at 450 Euros per tonne of plastic
  • The tax must be reported quarterly.

Spain is also enacting similar legislation. Please refer to this month’s Spain compliance updates for further information.

Introduction of the plastic tax

As seen earlier this year in April in the United Kingdom, and more recently in Italy this month, Spain is introducing a new plastic tax, effective from 1st January 2023. This is in line with the recurring trend across Europe to introduce fiscal measures with a distinctly ‘green’ agenda.

To this effect, the Spanish Congress has passed Law 7/2022 dated 8 April 2022. As in the United Kingdom and Italy, the underlying motivation behind this fiscal initiative is to encourage the reduction of non-reusable plastic, as well as promote the recycling of plastic waste.

Key elements of the tax include:

  • The tax applies to non-reusable plastic containers; products made of semi-finished plastic that will be used to create non-reusable packaging and plastic products that are used to close, trade, or display non-reusable containers
  • These components will generally become taxable when delivered to the customer
  • As in the United Kingdom, the tax is not set as a fixed percentage but is expected to be taxed at 0.45 Euros per kg.

Italy is also enacting similar legislation. Please refer to this month’s Italy compliance updates for further information.