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Tax Gap of Heated Tobacco Products in Israel
Until 2018, heated tobacco was not defined in the tax code, nor subject to an excise tax. On January 17th, 2018, the Minister of Finance signed an order that would tax heated tobacco sticks using the same tax system as that of cigarettes (i.e., the same tax rates and the same tax base). The heated tobacco tax was approved by the Knesset in March and was applied retroactively to January 1st, 2018.
A mixed taxation system applies to heated tobacco products and cigarettes. The mixed system includes an ad valorem rate based on the wholesale price, a specific excise, and a minimum excise based on the number of sticks or the weight of tobacco. As of May 2023, the ad valorem is 270% of the wholesale price and has not changed since 2013.The specific excise tax is NIS 429.66 per 1000 sticks, and a minimum total excise of NIS 823.10 per 1000 sticks.
There is no tax on heated tobacco devices.
Sources:
- Israel Tax Authority: Cigarettes taxation
- Israel Tax Authority: HTPs taxation
- Israel Tax Authority: RYO taxation
Last updated Sept. 1, 2023