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The Swedish Government has introduced a new excise duty in Sweden which aims at reducing the presence of hazardous substances in people’s homes.
By way of background, the government considers that EU regulations are not sufficient for said purpose and that Sweden should have the ambition to take the lead with national regulations against hazardous chemicals. Sweden should be a role model in the world in this field, the government notes.
As a result, Sweden’s chemical tax includes more substances than EU regulations such as Directive 2011/65/EU on the restriction of the use of certain hazardous substances in electrical and electronic equipment (the RoHS Directive) and Regulation (EC) No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH).
In this article, we explore the tax further and comment on a few challenges with the tax that we have noted as tax advisors.
Basics about the Tax
The new Act (Sw: lag (2016:1067) om skatt på kemikalier i viss elektronik), came into force on April 1, 2017, but in terms of liability to account for the tax, it is applicable as of July 1, 2017.
As a main rule, all businesses that in Sweden manufacture, import or bring/receive taxable goods from another EU Member State, fall within the scope of the tax. As such, they must report and pay the tax within five days of the taxable event, i.e. the moment of manufacture, when liability to pay customs charges arises (or should have arisen if the goods are free of customs charges) or when the goods are brought into Sweden.
The six-digit customs code (CN number) determines if a product is subject to chemical tax. Taxable goods include home appliances (vitvaror) such as ovens, refrigerators, dishwashers and washing machines, as well as other electronics such as computers, mobile phones, tablets and game consoles. For home appliances, the tax is 8 SEK/kilo while the tax on other electronics is 120 SEK/kilo. At most, the tax amounts to 320 SEK per individual product.
In the event that the taxable goods do not contain certain substances, the taxpayer may be entitled to deduct either 50 or 90 percent of the tax in the tax return. The burden of proof lays with the taxpayer who, thus, must be able to prove that the goods do not contain the substances in question.
For the purpose of postponing the payment of the tax, the Act includes a possibility for businesses to become approved stockists pending authorization of the Swedish Tax Agency.
Different from non-approved stockists, the chargeable event occurs when:
(a) in-scope goods are delivered to a non-approved stockist purchaser;
(b) in-scope goods are moved to a retail outlet owned by the approved stockist;
(c) in-scope goods are used for other purposes than sale; or
(d) when an approved stockist registration is withdrawn.
Moreover, for approved stockists, the tax liability does not arise for goods that have already been taxed or that have been delivered to a buyer in another country. In addition, tax is not due for stockists if the circuit board or the plastic parts of a taxable product have been:
(a) destroyed due to unforeseen events or force majeure;
(b) recycled; or
(c) reused in the manufacturing of taxable goods.
A Few Reflections on the Tax
Taxable Businesses
In our view, the tax is likely to affect most businesses in Sweden directly or at least indirectly. As a result of the use of customs codes to distinguish taxable goods from other goods, it does not matter if the taxable goods end up in a household or somewhere else. Most businesses in Sweden will thus be affected by higher prices on goods such as computers and routers.
Furthermore, it may come as a surprise for most Swedish businesses that although they are not operating in the retail sector they may be liable to the tax and, if so, must report and pay the tax on a paper tax return to the Swedish Tax Agency within five days of the taxable event.
As an example, should our firm, Skeppsbron Skatt Taxand, decide to purchase office computers from a German business with delivery from Germany, Skeppsbron Skatt Taxand would most likely be liable to report and pay the tax to the Swedish Tax Agency within five days from when the goods are brought to Sweden. First however, to even know if we are liable to the tax, we would need the CN number of the computers. This can prove difficult to acquire from our supplier that, in turn, may need to contact its own supplier. Furthermore, if the computers are indeed taxable under the Act, we must calculate the tax based on the computers weight down to the last gram. Finally, in support of any deduction of the tax, we must hold documentation of the exact chemical substances in the goods and whether these substances are additively or reactively added.
Another aspect of the tax liability is that not all businesses importing taxable goods have contemplated whether the CN number used in course of the import is correct for the goods in question. There may e.g. not be a difference for the customs levied on the goods if one CN number is used instead of a CN number in a subsection. However, since the chemical tax only applies to certain CN numbers of goods, it will now be important to use the correct customs code on the import. In some cases, it may even be justified to re-classify goods for customs purposes should it affect the liability to the chemical tax.
Overseas Businesses
Interestingly, the Act includes a provision exempting from tax the sales of taxable goods by overseas businesses when the goods are delivered directly to a Swedish consumer from a location outside of Sweden.
The rationale for exempting overseas businesses is, according to the government, that it would be too challenging for overseas businesses to understand and report the tax and for the Swedish Tax Agency to enforce the tax on overseas businesses.
As a consequence, the Swedish retail sector is likely to face increased competition from overseas businesses which do not have the tax as a cost component in their retail prices.
It should also be said that since VAT is calculated on top of the chemical tax, the increased cost due to the chemical tax for purchasers that cannot deduct VAT is 400 SEK per taxable product.
Second-hand Goods
The tax liability is, as mentioned, determined by customs codes, and it does not exempt second hand goods from taxation. As such, second hand goods are within the scope of chemical tax and are, due to the Act’s calculation mechanism, levied with the same amount of tax as a new product. One can wonder if this outcome in reality is defendable from an environmental point of view.
Approved Stockists
There are undoubtedly some perks with becoming an approved stockist; approved stockists can, as a general rule, postpone or even push forward the reporting and payment of tax to its purchaser (the latter if the purchaser is also an approved stockist).
Moreover, approved stockists report chemical tax electronically and on a monthly basis rather than on a paper form within five days of the taxable event. This is of course an important advantage both from an administrative and a cash-flow point of view.
As mentioned, approved stockists do not have to pay tax on the same product twice although the chargeable event may arise more than once. As an example, the chargeable event occurs twice when the stockist sells goods (first event, i.e. taxable), the goods are returned by the customer to the stockist and then the stockist sells the goods again (second event, i.e. exempted from tax). However, for stockists it may prove challenging or even impossible to differentiate goods that have been taxed from un-taxed goods in the warehouse. Goods thus risk to be taxed more than one time even when owned by approved stockists.
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