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Tax Gap of Heated Tobacco Products in Russia

Heated tobacco products were introduced in Russia in 2015 with the launch of IQOS by Philip Morris International. In November 2016, amendments to the tax code of the Russian Federation were approved to create a new tax category for vapor products, including heated tobacco products (Parts 1 and 2 of the Code). The amended law came into effect on January 1, 2017, defining heated tobacco products as “tobacco products intended for consumption by heating”, and applying a pure specific excise tax based on the weight of tobacco mixture. In January 2019, the tax code was amended again to increase tax rates for all tobacco products and introduce a mechanism for increases in the next 3 years, initially a 4% increase in specific tax rates through January 1, 2023. The law was amended again in 2020 to modify the mechanism so that the tax rate would increase by 20% annually from January 1, 2021, through January 1, 2023. 

These amendments also include a tax category for heated tobacco devices, effective starting Jan 1, 2020, and with subsequent increases in the next 3 years.

As of January 1, 2020, the current and scheduled excise rates are as follows:

  • From Jan1, 2020: RUB 6,040 per kilogram of heated tobacco and RUB 50 per device
  • From Jan1, 2021: RUB 7,248 per kilogram of heated tobacco and RUB 60 per device
  • From Jan1, 2022: RUB 7,538 per kilogram of heated tobacco and RUB 62 per device
  • From Jan1, 2023: RUB 7,839 per kilogram of heated tobacco and RUB 64 per device

Russia applies a mixed excise tax system on cigarettes, with an ad-valorem excise based on the “maximum retail price” (MRP), a specific tax based on the number of sticks, and a minimum excise. The rates are as follows:

  • From January 1, 2020: RUB 1,966 per 1000 sticks, an ad-valorem of 14.5% of the MRP, and a minimum excise of RUB 2,671 per 1000 sticks
  • From January 1, 2021: RUB 2,359 per 1000 sticks, an ad-valorem of 14.5% of the MRP, and a minimum excise of RUB 3,205 per 1000 sticks
  • From January 1, 2022: RUB 2,454 per 1000 sticks, an ad-valorem of 14.5% of the MRP, and a minimum excise of RUB 3,333 per 1000 sticks
  • From January 1, 2023: RUB 2,552 per 1000 sticks, an ad-valorem of 14.5% of the MRP, and a minimum excise of RUB 3,467 per 1000 sticks

Sources

Last Updated Feb. 25, 2021