Executive summary

Under Italy’s Budget Law for fiscal year (FY) 2022, the sugar tax will enter into force on 1 January 2023. The tax was originally introduced by the Budget Law for FY 2020 and subsequently postponed several times.

The tax aims to reduce the consumption of certain “sweetened drinks,” with a high content of added sweeteners.

Detailed discussion

Products subject to tax

The Sugar tax applies to “sweetened drinks” intended as finished products or products to be diluted (non-finished products), falling under European Union (EU) customs tariff heading 2009 and 2202, conditioned for sale, destined for human consumption, made with added sweeteners and having an alcoholic strength by volume not exceeding 1.2 % (volume).

Sweetener means any substance, whether of natural or synthetic origin, capable of giving a sweet taste to beverages.

The sugar tax is thus intended to apply to a wide range of products, such as fruit juice (including grape must or coconut water), vegetal and legumes juices, mineral and aerated waters with sugar or other sweeteners or flavoring, and other non-alcoholic beverages, if they meet the above characteristics.

Conversely, the tax is not applicable to certain sweetened drinks having a total content of sweeteners below a specific threshold or in other cases and circumstances.

Taxable persons

Depending on the country where the qualifying sweetened drinks are produced, packaged, or are shipped from, persons subject to the new tax are:

• The Italian manufacturer
• The Italian party providing for the packaging
• The person, resident or nonresident in Italy, on whose behalf the sweetened drinks are obtained by the Italian manufacturer or by the packaging plant’s operator
• The purchaser resident or nonresident in Italy for sweetened drinks shipped from other EU Member States
• The importer for sweetened drinks shipped from non-EU countries.

Taxable event

The relevant tax obligation arises and becomes due:

• At the time of supply of sweetened drinks from the Italian manufacturer to Italian consumers or to national distributors
• Upon receipt of the sweetened drinks by the purchaser, for products shipped from other EU Member States
• Upon the importation into the Italian territory, for sweetened drinks imported from non-EU countries

Amount of tax

Under the scope of application described above, the sugar tax is due at:

• €10 per hectoliter, for finished products
• €0.25 per kilogram, for products designed to be used after dilution

Sugar tax compliance

Depending on the party subject to pay sugar tax and its supply chain, different fulfilments may have to be met, among which are registration with Italian customs authorities, summary statements, a monthly tax return and finally payments.

Non-established subjects are required to appoint a tax representative who will have joint and several liability with the same.

As for sweetened soft drinks coming from non-EU countries, the tax is assessed and collected at the time of importation directly by the Italian customs, who are in charge for any audit activities for all the other sweetened soft drinks subject to sugar tax.

Thus, it is advisable to timely prepare for the sugar tax to avoid penalties, client complaints, and goods being blocked at the Italian customs.

Penalties

Failure to pay the sugar tax is subject to the application of a penalty ranging from two to five times the unpaid tax, with a minimum of €250.

In the event of late payment, an administrative penalty will be levied, equal to 25% of the tax due, with a minimum of €150.

The late filing of the relevant monthly returns is subject to a penalty ranging from €250 to €2,500.

Next steps

Although postponed several times, the sugar tax is scheduled to come into force as of 1 January 2023.

As the implementing law has been issued by the Italian Government, businesses should start assessing the impact of the new tax (specifically verifying sweeteners and total sweetener content) and also start implementing the new compliance processes.

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For additional information with respect to this Alert, please contact the following:

Studio Legale Tributario

• Alessandra Di Salvo, Rome, Milan | allesandra.di.salvo@it.ey.com