New excise tax on single-use plastic packaging

On June 2, the Council of Ministers published the Waste and Contaminated Soils Draft Bill, aiming to transpose Directive (EU) 2018/851 of May 30, 2018 amending Directive 2008/98/EC on waste, and Directive (EU) 2019/904 of June 5, 2019 on reducing the impact of certain plastic products on the environment.

The new developments in the draft bill include establishing a new excise tax on single-use plastic packaging to be levied on the manufacture, import or intra-community acquisition of single-use plastic packaging to be used in the Spanish market. It is scheduled to come into effect on July 1, 2021.

The purposes of the tax are:

• to boost the circular economy,
• to encourage research and use of more environmentally friendly replacement materials, and
• to improve environmental quality.

Its objective scope proved to be one of the most debated aspects in the consultation prior to implementing the tax.

The draft bill aims to tax single-use plastic packaging. To define packaging, the draft bill refers to Spanish Act 11/1997, of April 24, on packaging and packaging waste. The definition is completed by including all the single-use plastic containers for liquid or solid products, or packaging of food products or goods, as well as packaging that, although composed of multiple materials, contains plastic.

Its scope is, therefore, quite broad and does not distinguish between different types of plastic.

But what is reusable packaging? The draft bill defines it as any packaging conceived, designed, and marketed for multiple circuits or rotations throughout its life cycle, being refilled or reused for the same purpose for which it was conceived.

The tax will accrue based on the taxable event:

• Manufacturing à  when obtaining the subject packaging;
• Import à when the import duties are accrued (whether subject to them or not); and
• Intra-community acquisition à when the VAT on those transactions accrues or, as applicable, upon receipt.

In line with the developments introduced by Directive (EU) 2020/262 of December 19, 2019 laying down the general excise duty regime, the draft bill also envisages the unlawful introduction of packaging in the tax application territory (TAT) as a taxable event, in which case it will accrue when that introduction takes place. If that moment cannot be determined, it will be presumed to have taken place in the calendar quarter before the unlawful introduction was discovered.

In this context, an exemption is envisaged for the manufacture, import or intra-community acquisition of single-use plastic packaging:

• To be sent directly by the manufacturer, importer, or intra-community acquirer to a territory other than the TAT;
• Destroyed before the end of the self-assessment period; and
• Used for immediate packaging of medicinal products.

The taxpayers will be the individuals or companies and entities listed in section 35.4 of the Spanish General Taxation Act carrying out the manufacture, import, intra-community acquisition, or unlawful introduction of packaging.

Another of the most important aspects is determining the tax base, which relates to the amount, expressed in kilos, of plastic in the packaging included in the objective scope of the tax.

In any case, manufacturers can deduct from the tax base the amount in kilos of recycled plastic from products used in the TAT introduced in the manufacturing process.

The tax rate will be €0.45 per kilo.

The taxpayer can deduct from the amounts accrued in the period the tax previously paid for packaging

• sent outside the TAT;
• that before sale or delivery was no longer fit for use or was destroyed; and
• used for immediate packaging of medicinal products after paying the tax.

Excess deductions on the sums accrued may be offset in subsequent self-assessments (for four years), and the reimbursement of the positive balance can be requested in the last settlement period of the calendar year.

The self-assessment will be quarterly and must be filed in the first twenty calendar days of the second month after the end of the quarter. In imports, the tax will be settled as envisaged for customs debt.

The draft bill also creates the territorial registry of the tax on single-use plastic packaging, where taxpayers planning to perform activities constituting a taxable event will have to register before commencing their activity. Breaching this obligation will lead to a fixed fine of €1,000.

Regarding accounting obligations, some single-use plastic packaging manufacturers must keep computerized records of both raw materials and packaging, and those performing intra-community acquisitions must keep a stock record. They must submit them electronically to the management office within the month following the end of each calendar quarter.

Taxpayers not established in Spanish territory must appoint an individual or legal entity to represent them before the tax authorities regarding their tax obligations before their first transaction. Breaching this obligation also leads to a €1,000 fine.

Finally, waste managers must show proof of the amount in kilos of recycled plastic from products used in the TAT delivered to packaging manufacturers included in the objective scope of the tax. If the waste manufacturer fails to properly certify this amount, it can be fined 75% of the taxable amount corresponding to the packaging manufactured, with a minimum of €1,000.

Based on the information for the last year available (2017) on the amount of plastic packaging that Spain placed on the market, it is estimated that almost €724 million can be collected. Therefore, this tax could generate a sum similar to the tax on alcohol and alcoholic beverages, which last year generated €801 million of a total of €21.38 billion from all excise duties or the tax on the value of electricity production, which last year generated €717 million of a total €1.019 billion on environmental taxes (2019 annual tax collection report).