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Tax Gap of Heated Tobacco Products in Serbia
Heated tobacco products were introduced in Serbia in 2017 with the launch of IQOS by Philip Morris International. In 2015, the Law on Excise was amended to create a new tax category for heated tobacco. Heated tobacco products are defined as, “tobacco products that are heated but not combusted during use.” (Art. 3). A specific excise tax based on the weight (in kg) of tobacco mixture. Using the weighted average price (WAP) for cigarettes, the tax rates on heated tobacco is estimated to be RSD 6,072.15 per kg. The excise tax on cigarettes was initially set at 40% of the minimum excise tax per 1000 cigarettes, based on the weighted average price (Art. 10). The rate, as a percentage of the minimum excise tax of cigarettes, progressively increased to 80% to the minimum excise on cigarettes on January 1st, 2023, and is scheduled to increase to 90% on January 1st, 2024, and 100% on January 1st, 2025.
Serbia applies a mixed excise tax system on cigarettes that includes an ad valorem tax rate of 33% of the retail sales price, and a specific excise. The excise law includes an automatic indexation of the specific excise rate increase, every 6 months, based on changes in the harmonized annual consumer price index, but not to exceed a 2% increase (Art 40e. of the Excise Law). Currently the specific excise is RSD 84.25 per pack of 20 sticks. The law also includes a minimum excise duty, calculated using total excise on cigarettes, based on average retail price (WAP). Since August 1st, 2022, the WAP is RSD 293.14. As a result, the minimum excise is RSD 178.89 since January 1st, 2023.The specific excise is scheduled to increase to RSD 87.25 per pack in 2024 and to RSD 90.25 in 2025.
Sources:
- Excise tax Code of the Republic of Serbia and amendments (with rates effective Jan 1, 2023 and after): Articles 1, 2, 3, 10, 14a, 40a-g
- Excise tax Code of the Republic of Serbia (for historic rates from 2012 to 2022)
- Order on minimum excise rates (amended)
- Order on minimum excise rates from 27 June 2020: Official Gazette of RS No.91/2020
Last updated Sept. 1, 2023