Spanish Tax on Non-Reusable Plastic Packaging Has a Rocky Start

A new green tax has been in force in Spain since Jan. 1—an excise duty on non-reusable plastic packaging. This indirect tax was approved to promote the circular economy and reduce waste generation in Spain.

Although this tax is directly linked to the European objective of reducing single-use plastic waste, it hasn’t been harmonized within the EU, and no other member states have implemented similar taxes. Those planning to do so have either postponed it, as in Italy, or narrowed the scope of the objective, as in Portugal.

The Spanish government disregarded the potential negative effects for the competitiveness of Spanish industries, particularly in the current scenario of global inflation, and ignored requests from industry to postpone the tax.

Spanish operators are facing practical constraints in the management of the new tax—which in some cases might result in indirect costs that are higher than its economic impact—due to its wide scope, the vague regulations available, and the new formal compliance obligations.

Uncertainties and Challenges Arising

Scope is Wide

The target scope of the tax is wide, including non-reusable packaging containing plastic, semi-finished plastic products intended for the production of such packaging, and products containing plastic intended to enable it to be closed, marketed or presented.

Despite the lawmakers’ efforts to determine the target scope by referring to definitions provided in other regulations (“packaging,” “plastic,” “recycled plastic”), it is complicated to determine whether some products are included. For instance, for determining whether a product is deemed reusable, the Spanish tax authorities recently issued criteria stating this would depend on whether a product was conceived, manufactured, and commercialized to perform multiple trips, rotations, or uses throughout its life cycle, irrespective of how it is used by consumers.

To prove this, taxpayers can rely on legally accepted evidence, such as certifications issued by accredited standardizing entities, that would lead to costs for the taxpayers and uncertainty over whether the evidence would be accepted.

Three Taxpayer Categories

The taxable event includes three different categories of taxpayers: manufacturers in Spain of products in the target scope of the tax, intra-EU Community acquirers, and importers.

This leads to a transverse application of the tax to all industry sectors introducing goods in Spain (via the EU or importation) containing single-use plastic packaging, such as packing tape and bubble wrap, irrespective of whether they are engaged in the plastics sector.

Some companies might not be aware of this issue yet but are still obliged to fulfill certain inventory and invoicing obligations, registration with tax authorities, and payment of taxes, with which they might not be familiar.

Different From VAT

It’s important to distinguish between this tax and value-added tax, as the territory of application for both taxes differs. Transactions with the Canary Islands, Ceuta, and Melilla would be treated as domestic transactions for this tax, unlike for VAT purposes.

Taxable Amount Calculation

The taxable amount is based on the number of kilograms of non-recycled plastic contained in the products (with a tax rate of 0.45 euros per kilogram), and products composed of plastic and other materials are only taxed on the non-recycled plastic.

This is the main challenge for intra-EU acquirers or importers, who must require suppliers to provide accurate details for the calculation of the taxable amount. When suppliers don’t provide these details, taxpayers have to look at alternative sources, or even estimate them. The non-recycled plastic amount must be certified by accredited entities, which may lead to additional costs for taxpayers and potential controversy with tax authorities.

Applicable Benefits

Tax benefits apply when products have specific characteristics or are intended for certain uses, such as those sent outside Spanish territory, refunds, products rendered unsuitable, products for use in the healthcare industry, paints, inks, lacquers, and some adhesives.

Taxpayers must prove their eligibility for the benefits—non-taxation, exemption, deduction, or refund. This may require them to ask purchasers for a declaration regarding the products’ destiny, with corresponding administrative and commercial costs. Specific penalties are set out for inappropriate application of tax benefits.

Formal Obligations: the Real Burden

Taxpayers established in Spanish territory, except for importers, are obliged to register in the territorial tax register and will be provided with an identification number, or CIP code. Non-established taxpayers, including importers, must appoint and register a representative, who will be the only person able to deal with the tax authorities on behalf of the taxpayers. Specific penalties are set out for failure to appoint or register a representative.

Probably the most resource-consuming obligation, at least initially, is the duty for manufacturers and intra-EU Community purchasers to maintain a register of the products in scope of the tax, which must be submitted periodically to the tax authorities. This should be compiled carefully to ensure accuracy, as the information provided should match the self-assessments, and any mistakes can lead to tax exposure.

Further, a tracking system for the tax paid per product has been introduced. Manufacturers must indicate separately in the invoice, and pass on to the purchasers, the tax levied on products (both payable or already paid to the tax authorities). In subsequent deliveries of the same products further up the chain in Spain, irrespective of whether those transferors are taxpayers, on request by the acquirer it is mandatory to indicate in the invoice or in a separate certificate the amount of tax paid for the products and whether any exemption applies. This system, which is intended to enable acquirers to claim tax refunds in the cases provided for by the law, could be confusing for some operators and requires the adapting of invoicing software.

Finally, manufacturers and intra-EU Community purchasers must file a self-assessment for paying the VAT, monthly or quarterly depending on whether their VAT turnover exceeds 6,010,121.04 euros ($6.5 million) in the previous fiscal year. Importers, however, settle the tax directly with the import customs office.

A Glimmer of Hope

The initial experience of the tax has been hectic for both taxpayers and tax authorities, as many gray areas haven’t been well defined, and the criteria to be followed aren’t clear. Tax authorities have tried to provide certainty by issuing public information online, which must be welcomed cautiously, as some criteria aren’t legally covered and tax auditors wouldn’t be legally bound by them. A secondary regulation, to which the law makes reference, hasn’t as yet been drafted.

It has been suggested that the Spanish government might start working on amendments or developments to address the most controversial areas of the tax, so taxpayers should stay tuned for further updates.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Luis Canelo is team leader, tax, with Baker McKenzie Madrid, S.L.P.

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