In a judgment delivered in September 2023 by the Court of Appeal of Iceland (Landsréttur) in Case 308/2022, ST ehf v íslenska ríkinu, it stated that the imposed of a surcharge of 18% on tobacco products if lawfully provided for in national law.
According to Icelandic law on the sale of tobacco, the State Alcohol and Tobacco Store (ÁTVR) provided that all imported tobacco imported into Iceland must be delivered, first, to ÄTVR, and second, only then can legal persons purchase it for wholesale/retail use, for the goods to eventually reach the consumer market. Given it is the wholesale market that ordinarily acquire the goods from ÁTVR, no VAT is applied at this stage, but, a surcharge of 18% is placed on the tobacco goods.
ÁTVR argues that it being the recipient of all tobacco goods imported into Iceland is done, first, 1) to ensure the surcharge of 18% is levied, and second, 2) to ensure all tobacco products are properly packaged, to account for health labelling requirements.
The applicant in this case argued that given he was not a wholesaler, but selling the goods online to reach the retail market, he did not have to pay the 18% surcharge. Essentially therefore, the case was about whether national law provided for the imposition of the tax that was charged, given the applicant, was not, in his view, a wholesaler.
The judgment of the Court of Appeal held that whether the applicant was a wholesaler or retailer was immaterial, as the surcharge being imposed ensured that it was applied, and could not be easily circumvented. The judgment of the Court of Appeal upheld the initial judgment of Reykjavík District Court (Héraðsdómur Reykjavíkur) in Case E-1989/2021.
The judgment by the Court of Appeal of Iceland (Landsréttur) in Case 308/2022, ST ehf v íslenska ríkinu can be read here.