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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, and initially set at 40% of the minimum excise tax per 1000 cigarettes, based on the weighted average price (WAP) of cigarettes (Art. 10). 

The rate, as a percentage of the minimum excise tax of cigarettes, is scheduled to increase from 40% to 60% from January 1, 2021, 70% from January 1, 2022, 80% from January 1, 2023, 90% from January 1, 2024, and 100% from January 1, 2025. Using the WAP for cigarettes, the tax rates on heated tobacco are

  • Since July 1, 2020: RSD 3,315 per kilogram.
  • Since Jan 1, 2021: RSD 4,972.5 per kilogram.

 

Serbia applies a mixed excise tax system on cigarettes that includes an ad-valorem tax rate of 33% of the retail 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).  The law also includes a minimum excise duty, calculated using total excise on cigarettes based on average retail price (WAP). Since August 1, 2020, the WAP is RSD 165.7. As a result, the minimum excise has been RSD 274.24 since Jan 1, 2020. 

Since 2020, the specific excise is scheduled as:

  • From January 1, 2020: 73.73 dinars per pack, and from Jul 1, 2020: 75.25 dinars per pack
  • From January 1, 2021: 76.75 dinars per pack, from Jul 1, 2021: 78.25 dinars per pack
  • From January 1, 2022: 79.75 dinars per pack, from Jul 1, 2022: 81.25 dinars per pack
  • From January 1, 2023: 82.75 dinars per pack, from Jul 1, 2023: 84.25 dinars per pack
  • From January 1, 2024: 85.75 dinars per pack, and from Jul 1, 2024: 87.25 dinars per pack
  • From January 1, 2025: 88.75 dinars per pack, and from Jul 1, 2025: 90.25 dinars per pack

For purposes of the interactive tax maps, we use the rates that were in effect as of Oct 2020, to match the date of price data.

Sources

Last Updated Feb. 25, 2021