VAT Reduction to Include Tobacco

Germany will reduce its value-added tax (VAT) by three percentage points to 16 percent from July 1 until the end of 2020 as part of a massive stimulus package designed to offset the economic impact of the coronavirus pandemic.

While the VAT reduction will reportedly also apply to tobacco products, it remains unclear to what extent smokers will benefit from lower prices.

Tobacco companies will be able to pass on the discounted tax to consumers at the earliest in two to three months—assuming they want to do so at all.

This is because new prices require tobacco companies to purchase new tax stamps, the delivery of which takes about eight weeks. The manufacturers will also have to apply for new barcodes and print them on their products, which can take between two and three months, depending on the company’s resources.

According to experts, it is unlikely that dealers will be given new tax stamps for cigarettes that have already been produced and packaged.