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Tax Gap of Heated Tobacco Products in Israel

Until 2018, heated tobacco was not defined in the tax code, nor subject to any excise tax. On January 17, 2018, the Minister of Finance signed an order that would tax heated tobacco sticks using the same tax system as that of cigarettes, i.e., the same tax rates and the same tax base. The heated tobacco tax was approved by the Knesset in March and was retroactive to January 1, 2018.    

The excise tax system on cigarettes and heated tobacco consists of a mixed system that includes an ad-valorem based on the wholesale price, and a specific excise and a minimum excise based on the number of sticks. The ad-valorem is 270% of the “wholesale price” and the rate has not changed in recent years. The specific excises have been as follows:

  • From January 1 to December 31, 2018: a specific excise tax of NIS 395 per 1,000 sticks, and a minimum total excise of NIS 756.69 per 1,000 sticks 
  • From January 1 to December 31, 2019: a specific excise tax of NIS 399.73 per 1,000 sticks, and a minimum total excise of NIS 765.7 per 1,000 sticks 
  • From January 1 to December 31, 2020: a specific excise tax of NIS 398.55 per 1,000 sticks, and a minimum total excise of NIS 763.49 per 1,000 sticks 

Sources  

Last Updated Mar. 8, 2021