What has changed?
On 3rd of December 2018, Parliament adopted the Law no. 93/2018 “On Some Amendments and Additions to Law No. 9975 dated 28.7.2008 On National Taxes”, which is expected to enter into force on 1 January 2019.
This law changes the taxation scheme, and, expands the category of goods subject to taxation from “plastic packaging” to “plastics and packaging” (Article 1, Law No. 93/2018).
Consequently, all goods classified under Chapter 39 of the Combined Nomenclature of Goods (hereinafter referred to as “HS”) become subject to Tax on Plastics and Packaging (hereinafter referred to as “TPP”) (Article 2, paragraph 3)., Law No. 93/2018).
As a result of this change, items such as plastic crates, barrels over 20 liters, packing boxes and food containers, etc. become subject to TPP, as the exemption from payment of TPP is abolished (Article 5 Item 2, Law No. 93/2018).
The taxation rate of TPP:
- for plastics in primary forms, classified under Tariff heading 3901 to 3914 of HS, is set at ALL 25/kg, applicable for the net weight of the product, and
- for all other plastics and packaging classified under Chapter 39 of HS, is set at ALL 35 lek/kg, applicable for the net weight of the product (Article 2 Item 3, Law No. 93/2018).
The moment of payment of TPP will be that of release for free circulation (Article 2 Item 3, Law No. 93/2018) and will be collected by the Customs Administration (Article 3, Law No. 93/2018).
The impact
For businesses affected by this change, the tax is estimated to bring an overall additional annual cost of USD 10.5 million[1]:
- For plastics in primary forms classified under Tariff headings 3901 to 3914 of HS, the annual additional cost is estimated to be USD 1 million (taxation level was zero, became ALL 25/kg). This category includes polyethylene granulate, polypropylene granulate, PVC granulate, polystyrene, polyurethane etc. which serve as raw materials for the production of plastic pipes, plastic packaging, sponge etc.
- For plastic packaging classified under Tariff heading 3923 of HS, the change in taxation level is estimated to reduce the annual import costs by USD 5 million (taxation level was ALL 100/kg, becomes ALL 35/kg). This category includes plastic bottles, plastic bags, etc.
- For other plastic articles classified under Chapter 39 of HS, the additional annual cost is estimated to be USD 9 million (taxation level was zero, becomes ALL 35/kg). This category includes plastic pipes and fittings, PVC profiles, plastic strips and films, plastic sheets, home and office plastic items (such as plastic cups, plastic buckets, etc.), plastic accessories etc.
The tax burden, as a result of the change in taxation scheme and rate, for all goods classified under Chapter 39 of HS excluding Tariff heading 3923 of HS, is calculated to be on average around 12% of their import price.
Who is impacted?
The main business stakeholders directly affected by this change are importers, domestic manufacturers and exporters of plastics and packaging.
1. Importers/traders of plastics in primary forms such as polymers of ethylene, polymers of propylene, polymers of styrene, ploymers of vinyl chloride, etc., at the time of customs clearance (release for free circulation) will pay TPP at the rate of ALL 25/kg, applicable for the net weight of the product.
Example 1: A consignment of 20,000 kg polyethylene granules is customs cleared (released for free circulation). The amount of TPP to be paid on import will be ALL 500,000 (20,000 kg * ALL 25/ kg = ALL 500,000).
The amount of TPP of ALL 500,000 will also be included in the taxable base for the calculation of VAT on import, and, the additional VAT due on this consignment will be ALL 1oo, ooo (ALL 500,000 * 20% VAT = ALL 100,000).
2. Domestic producers who import plastics in primary forms to produce finished products, at the moment of customs clearance (release for free circulation) will pay TPP at the rate of ALL 25/kg, which is calculated for the net weight of the product.
3. Domestic producers who purchase plastics in primary forms from other importers are indirectly impacted by the tax, as the suppliers of plastics in primary forms will reflect the effect of TPP at the level of ALL 25/kg in their selling price.
TPP also impacts domestic producers who import directly or purchase from other importers plastics in primary forms, to produce products which are not classified under Chapter 39 of HS.
Example 2: A pair of imported shoes with plastic soles are not subject to TPP, since TPP applies only to the plastic articles classified under Chapter 39 of HS, and does not apply to those of Chapter 64 of HS where shoes are classified (including those with plastic sole).
A domestic shoe manufacturer, who imports plastic materials in primary forms to produce plastic soles and assembles locally manufactured footwear, will be subject to TPP as he/she pays the tax at the moment of customs clearance (release for free circulation) of plastic granules.
4. Importers of plastic articles such as plastic pipes and fittings, PVC profiles, plastic strips and films, plastic sheets, home and office plastic items etc. that are classified under Chapter 39 of HS will be subject to TPP at the rate ALL 35/kg for the net weight of the product, which will affect their liquidity at the moment of customs clearance (release for free circulation).
5. Exporters are the most negatively impacted category, compared to other categories, as the application of a tax on plastics at the moment of customs clearance (release for free circulation) affects the cost of the final product to be exported.
Consequently, the international competitiveness and export opportunities of Albanian products are affected, both for those classified under Chapter 39 of HS (plastic pipes etc.) as well as for articles classified under other Chapters of HS and incorporate plastics, which, prior to processing have been customs cleared (released for free circulation).
Optimisation of payment through Customs Procedures
Customs legislation provides for certain special procedures such as “warehousing” and “processing” which primarily aim at creating favorable conditions for producers and warehouse keepers, enhancing international competitiveness and promoting the export opportunities of goods manufactured and processed in Albanian territory.
Our assistance
Gazidede Customs & Excise Consulting is available to assist importers/traders, manufacturers and exporters whose activity is directly affected by the Tax on Plastics and Packaging (TPP). Our assistance consists of:
- Analyzing the impact of TPP on your business;
- Identification of the customs procedure(s) through which the TPP payment may be optimized;
- Preparation of the necessary documentation;
- Ongoing assistance in case of necessity.
Besar Gazidede
Customs & Excise Consultant
Gazidede Customs & Excise Consulting
Sulejman Delvina Street
Wilson Square, 1/1
Tirana, Albania
Email: besar.gazidede@gazidede.al
Mob: +355 69 405 0005
Web: https://gazidede.al/
[1] The calculations are based on quantitative data on imports of articles classified in Chapter 39 of the Combined Nomenclature of Goods for 2015 and 2016. Source UN Comtrade Database. This amount does not include the impact on the taxable basis for the purposes of calculation of VAT on import. Exchange rate USD/ALL = 108.
NOTE: This material is of a general nature with informative character and expresses our understanding of the issues addressed. This material does not constitute specific professional advice. We do not hold any responsibility for any actions that you or other parties undertake based on this material, without obtaining specific professional advice. The statistical data were obtained from open sources of information (UN Comtrade Database) and we are not responsible for their accuracy. © Gazidede Customs & Excise Consulting. All rights reserved.