Multi-use flavorings are not subject to the vaping liquids tax

The nature of the raw materials used in the manufacturing of vaping products determines their tax treatment at customs. A recent ruling from the Dirección General de Tributos (DGT) has delimited when the importation of flavorings constitutes a taxable event for the Tax on Liquids for Electronic Cigarettes and other Tobacco-related Products.

What the DGT has ruled

The inquiry analyzes whether the importation of flavorings, intended for manufacturing under a suspensive regime, should be taxed under this excise duty. The Administration's criteria establish that if the imported flavorings are susceptible to multiple applications, they do not fall within the objective scope of the tax. Consequently, their importation does not trigger the taxable event.

However, the exemption is strictly limited to the importation phase of the raw material. The regulations establish that the tax will be accrued at the moment these flavorings are mixed with other components to obtain the final vaping liquid. In that case, the taxable event for manufacturing will occur, which is accrued upon leaving the factory, unless the products are intended for export or other suspensive regimes.

What this means for you

For companies manufacturing vaping liquids that import flavorings as raw material, this criterion represents a fundamental technical distinction. If the raw material has a versatile use and is not exclusive to vaping products, the tax burden does not occur at customs, but at the production plant.

This scenario allows for different cash flow management, as the tax is not settled at the moment the flavorings enter national territory, but when the finished product leaves the manufacturing line. It is necessary to precisely identify the nature and possible uses of the flavorings to determine their correct tax classification.

What you should do

Companies should verify the technical documentation from their flavoring suppliers to prove that these have diverse applications beyond the vaping sector. Having this evidence is key to justifying to the Administration that the importation is not subject to the excise tax at customs. It is also fundamental to ensure that the control of manufacturing processes and suspensive regimes is aligned with the moment the manufacturing tax is accrued.