New Packaging Tax Becomes Effective in the Netherlands on ...

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Alert <strong>Tax</strong> November 2007 The <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> does not apply to deliveries outside <strong>the</strong> territory of <strong>the</strong> Ne<strong>the</strong>rlands. A manufacturer will <strong>the</strong>refore have to make a dist<strong>in</strong>ction between Dutch and foreign deliveries. For example, a Dutch peanut butter manufacturer will be taxed at <strong>the</strong> moment of <strong>the</strong> first delivery of <strong>the</strong> peanut butter to a wholesaler <strong>in</strong> <strong>the</strong> Ne<strong>the</strong>rlands. The producer will be taxed for <strong>the</strong> glass jar, <strong>the</strong> plastic lid, <strong>the</strong> box, <strong>the</strong> foil and any pallets used dur<strong>in</strong>g transportation. Any subsequent deliveries by <strong>the</strong> wholesaler to a supermarket, or by <strong>the</strong> supermarket to a consumer are not taxed. The <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> concerns one s<strong>in</strong>gle charge, levied at <strong>the</strong> moment of first delivery <strong>in</strong> <strong>the</strong> Ne<strong>the</strong>rlands. Ano<strong>the</strong>r example: a U.S. apparel company imports t-shirts <strong>in</strong>to <strong>the</strong> Ne<strong>the</strong>rlands. After <strong>the</strong>y are imported, <strong>the</strong> U.S. company sells <strong>the</strong> shirts to Dutch, German and French retailers. The shirts are packed <strong>in</strong> plastic bags and <strong>the</strong> plastic bags are packed <strong>in</strong> cardboard boxes. When sell<strong>in</strong>g to Dutch retailers, <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> becomes due. No <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> is due on <strong>the</strong> supplies to German and French retailers. The tariff Because <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> legislation has not yet been formally approved, <strong>the</strong> tariffs are not confirmed. However, it is clear that <strong>the</strong> amount of <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> due and payable will depend on <strong>the</strong> packag<strong>in</strong>g materials used, how <strong>the</strong> materials are used, and <strong>the</strong> weight of <strong>the</strong> materials. The first 15,000 kilograms of packag<strong>in</strong>g materials will be exempted. Companies which "use" less than 15,000 kilograms of packag<strong>in</strong>g materials with regard to supplies to <strong>the</strong> Ne<strong>the</strong>rlands will <strong>the</strong>refore be exempted from <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> 1 . However, exempted companies will have to comply with some of <strong>the</strong> adm<strong>in</strong>istrative obligations. The legislation makes a dist<strong>in</strong>ction between primary, secondary, and tertiary packag<strong>in</strong>g. Primary packag<strong>in</strong>g refers to <strong>the</strong> material used directly to package <strong>the</strong> product (e.g., a glass bottle for beer, a plastic bottle for shampoo). Secondary packag<strong>in</strong>g is used to package <strong>the</strong> primary packag<strong>in</strong>g (e.g., a box or paper). Tertiary packag<strong>in</strong>g is transport packag<strong>in</strong>g (e.g., foil, pallets, crates). The proposed tariffs are 2 : Material Primary <strong>Packag<strong>in</strong>g</strong> Tariff (per kg., <strong>in</strong> Euros) Secondary & Tertiary <strong>Packag<strong>in</strong>g</strong> Tariff (per kg., <strong>in</strong> Euros) Glass 0.0456 0.0160 Alum<strong>in</strong>um 0.5731 0.2011 O<strong>the</strong>r metals 0.1126 0.0395 Plastics 0.3554 0.1247 Paper/Cardboard 0.0641 0.0225 Wood 0.0228 0.0080 O<strong>the</strong>r materials 0.1017 0.0357 2 GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | WWW.GTLAW.COM
Alert <strong>Tax</strong> November 2007 The consequences for companies On <strong>the</strong> basis of <strong>the</strong> current proposal for <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong>, we foresee various (practical) issues related to its <strong>in</strong>troduction. For example, it seems necessary for every company to check whe<strong>the</strong>r its supplier should be considered a "manufacturer" under <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> legislation. In <strong>in</strong>stances where a product is sourced from outside <strong>the</strong> Ne<strong>the</strong>rlands, <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> is due if <strong>the</strong> dest<strong>in</strong>ation of <strong>the</strong> product is with<strong>in</strong> <strong>the</strong> Ne<strong>the</strong>rlands. But how about when <strong>the</strong> products come from outside <strong>the</strong> Ne<strong>the</strong>rlands, but are <strong>in</strong>voiced by a Dutch company? Companies will also be obligated to determ<strong>in</strong>e how much <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> is due, tak<strong>in</strong>g <strong>in</strong>to account <strong>the</strong> supplier 3 , <strong>the</strong> weight of <strong>the</strong> packag<strong>in</strong>g and <strong>the</strong> dest<strong>in</strong>ation of <strong>the</strong> products. For example, take a company trad<strong>in</strong>g <strong>in</strong> televisions. A television is shipped <strong>in</strong>side a box. The box conta<strong>in</strong>s several smaller boxes and/or plastic bags conta<strong>in</strong><strong>in</strong>g accessories. How should <strong>the</strong> company track and record <strong>the</strong> exact weight of <strong>the</strong> packag<strong>in</strong>g? And what if <strong>the</strong> packag<strong>in</strong>g is replaced dur<strong>in</strong>g transport or storage? It is also <strong>in</strong>terest<strong>in</strong>g to exam<strong>in</strong>e <strong>the</strong> position of logistical service providers and packag<strong>in</strong>g companies. If <strong>the</strong>y are <strong>the</strong> ones packag<strong>in</strong>g <strong>the</strong> product, <strong>the</strong>n who pays <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong>? And what if a foreign company delivers goods to a Dutch consumer, e.g., sales via <strong>the</strong> Internet. Most probably, <strong>the</strong> foreign company, if not exempted, will have to pay <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong>. How will <strong>the</strong> Dutch authorities review whe<strong>the</strong>r <strong>the</strong> foreign company complies with <strong>the</strong> adm<strong>in</strong>istrative obligations? Potential <strong>in</strong>fr<strong>in</strong>gement of EC law Tak<strong>in</strong>g <strong>in</strong>to consideration <strong>the</strong> aforementioned issues and o<strong>the</strong>r possible (practical) problems, Dutch companies may be persuaded to switch from foreign to domestic suppliers. The reason be<strong>in</strong>g that this ensures that <strong>the</strong> supplier will already have handled much of <strong>the</strong> adm<strong>in</strong>istrative burden and <strong>the</strong> f<strong>in</strong>ancial obligations. From this po<strong>in</strong>t of view, <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> could result <strong>in</strong> a restriction of free trade with<strong>in</strong> <strong>the</strong> EU. Because of <strong>the</strong>se and o<strong>the</strong>r concerns, <strong>the</strong> Dutch Council of State has concluded that <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> may <strong>in</strong> fact be a violation of EC law. If an <strong>in</strong>fr<strong>in</strong>gement of EC law is confirmed by a court 4 , such <strong>in</strong>fr<strong>in</strong>gement could result <strong>in</strong> a situation where <strong>the</strong> paid <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> will have to be refunded to companies and <strong>the</strong> legislation amended. In so far as <strong>the</strong> presumed <strong>in</strong>fr<strong>in</strong>gement is confirmed, companies cannot automatically make a claim for remission. This can only be done when an adm<strong>in</strong>istrative objection has been filed <strong>in</strong> a timely manner <strong>in</strong> advance. Conclusions It is important that companies prepare for <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> that will be implemented on January 1, 2008. We advise companies to review at least <strong>the</strong> follow<strong>in</strong>g aspects: • Will <strong>the</strong> company be subject to taxation? • How can <strong>the</strong> amount of <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> due be determ<strong>in</strong>ed? • Can <strong>the</strong> <strong>Packag<strong>in</strong>g</strong> <strong>Tax</strong> be passed on to Dutch customers? 3 GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | WWW.GTLAW.COM
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