Spain: new tax measures in the Law on waste and contaminated land for a circular economy

Spain - 10 / 04 / 2022

Spain Tax Commentary

Law 7/2022 of April 8, 2022 creates an excise tax on non-reusable plastic packaging and a tax on waste sent to landfill, incineration and co-incineration, which will come into force on January 1, 2023. It moreover imposes an obligation on local authorities to charge a fee in relation to waste treatment, modifies the rules on the charge on the use of inland water for electricity generation and adds amendments to the VAT rules for gifts of products.

Law 7/2022 of April 8 , 2022 on waste and land contamination for a circular economy, published in the Official State Gazette (BOE) on April 9, 2022, contains a range of tax measures which are summarized below (for our commentary with an analysis of non-tax measures, see here).

1. New excise tax on non-reusable plastic packaging

This indirect tax is charged on the use, in the area where the tax applies, of non-reusable (or single-use) packaging containing plastic, including both empty packaging and any holding, protecting, or used to handle, distribute or present, goods.

It will be applicable throughout Spain, although subject to the provincial “foral” regimes and the provisions in international treaties.

It is levied at a proportional rate of €0.45 euros on the kilograms of non-recycled plastic contained in taxable products, at the time of their manufacture, intra-Community acquisition or import.

Namely, the manufacture, import or intra-Community acquisition of the following products:

i. Non-reusable packaging containing plastic

Packaging means all articles designed for the containment, protection, handling, distribution and presentation of goods, including:

Those defined as packaging in Law 11/1997 of April 24, 1997 on packaging and packaging waste.
Any others which, while falling outside that definition, are designed to achieve the same functions and may be used in the same way, unless they are integral parts of products and are needed to hold, support or preserve those products throughout their useful lives, and where all of their elements are to be used, consumed or disposed of jointly. According to the preamble to the Law, this definition includes plastic cups or rolls of plastic for wrapping or preventing breakages in the transportation of products.

Non-reusable packaging is any that has not been conceived, designed and marketed to accomplish multiple trips or rotations over its life cycle, or to be refilled or reused for the same purpose for which it was conceived.

ii. Semi-finished plastic products used to obtain the packaging referred to in point i. above, such as preforms or thermoplastic laminates.

Semi-finished products are intermediate products obtained from raw materials on which one or more processing operations have been performed and which require one or more subsequent processing phases to be able to be used for their packaging function.

iii. Products containing plastic used to enable the closure, marketing or presentation of non-reusable packaging.

The law contains various nontaxable events, and conditions for exemption, tax credits and refunds, relating, among others, to the following products:

Products that have become unfit for use or have been destroyed or are returned to be destroyed or reintroduced in the manufacturing process, following payment to purchasers of the amounts owed for them.
Products that are to be sent directly by the manufacturer, or by a third party on its behalf or for its account, to a place outside the area where the tax applies.
Paints, inks, lacquers and adhesives, conceived to be applied to the products subject to the tax.
Non-reusable plastic packaging which, while serving for containment and handling functions, is not designed to be delivered jointly with those goods.
Products to be used to package medicines, medical devices, food for special medical uses, infant formulas for hospital use, or hazardous healthcare waste.
Plastic rolls employed in bundles or bales for storing hay or cereals for agricultural or livestock use.
Intra-Community imports and acquisitions of packaging, where the total weight of the non-recycled plastic in the packaging does not exceed 5 kilograms in a month.
Semi-finished products for closing mechanisms, not to be used to obtain packaging.

The taxable person, chargeable event and tax return period are defined according to whether the tax is levied on the manufacture, or on an intra-Community import or acquisition, of a product:

i. Manufacture

The taxpayer and person required to self-assess and pay over the tax is whoever performs the manufacture of the products. The following do not qualify as manufacturers or therefore as taxpayers for the tax: whoever gives the final form as packaging to the product out of the semi-finished products, or includes in the packaging any other plastic elements on which the tax has been levied, such as closing mechanisms.

The chargeable event occurs when the first supply or placement at the disposal of the purchaser is made in the territory where the tax applies, of products subject to the tax by the manufacturer; unless there are advance payments, in which case, the tax will become chargeable when all or part of the price is collected, on the amounts actually received.

The tax return period coincides with the calendar quarter, except for taxpayers who have monthly VAT return periods, in which case their tax return periods will be monthly.

Manufacturers will have to keep records for the products that are subject to the tax, and if need be, for the raw materials needed to obtain them. These records will have to be kept on the AEAT’s (the Spanish Tax Agency’s) website. Implementing regulations will be adopted on these obligations.

ii. Intra-community acquisitions

The taxpayer and person required to self-assess and pay over the tax is whoever makes the acquisition.

The chargeable event for the tax will occur on the 15th day of the month following that in which the dispatch or transport of the products subject to the tax to the purchaser begins, unless the invoice for those products is issued on an earlier date, in which case, the tax becomes chargeable on the date the invoice is issued.

The tax return period coincides with the calendar quarter, except for taxpayers who have monthly VAT return periods, in which case their tax return periods will be monthly.

Inventory records must be kept, which must be filed with AEAT's management office. Implementing regulations will be adopted on this obligation.

iii. Imports

The taxpayer is whoever makes the import.

The chargeable event will occur at the time when import duties would have become chargeable, under the customs legislation, regardless of whether or not the imports concerned are subject to those import duties.

The tax will be assessed using the same method as that specified for the customs debt under the customs legislation. The customs import declaration form must mention the quantity of non-recycled plastic that is imported and, if it qualifies, the exemption for imports not exceeding 5 kilograms in a month.

Lastly, invoicing related obligations are specified in relation to sales or supplies of products subject to the tax:

i. On the first sale or supply made after the manufacture of the products in the area where the tax applies, manufacturers will have to charge to purchasers the amounts of tax becoming chargeable when that sale or supply is made.

On any invoice that that they issue, they will have to state separately :

The amounts of tax that have become chargeable.
The quantity of non-recycled plastic contained in the products, expressed in kilograms.
Whether any of the conditions for exemption is applicable, specifying the article under which the sale or supply is exempt.

ii. In all other cases, following a request by the purchaser, whoever makes the sales or supplies of the products subject to the tax will have to mention in a certificate or on any invoices they issue in relation to those sales or supplies:

The amount of tax paid on the products or if they qualified for a condition for exemption, the article under which that tax benefit was claimed.
The quantity of non-recycled plastic contained in the products, expressed in kilograms.

Where simplified invoices are issued with the contents referred to in article 7.1 of the Invoicing Regulations, this obligation will not be required.

2. Tax on waste sent to landfill, incineration and co-incineration

This is another indirect tax on waste sent to landfill sites for disposal or to incineration or co-incineration facilities for disposal or recovery for energy production.

It will apply throughout Spain, although subject to the “foral” provincial regimes and the provisions in international treaties.

The tax is devolved to the autonomous community governments, to which certain legislative, management, collection and auditing powers are granted, and it will replace existing autonomous community taxes.

Taxable transactions for this tax are the sending of waste for disposal at authorized landfill sites, or for disposal or recovery for energy generation at authorized waste incineration or co-incineration facilities, which may be either publicly or privately owned, and have to be located in the area where the tax applies.

A number of instances of sent waste are exempt from the tax. For example:

The sending of waste ordered by public authorities in events qualifying as force majeure, extreme necessity or catastrophe, or in cases involving property seized for destruction.
The sending of waste that comes from taxable transactions on which the tax has effectively been charged.
The sending of waste that is legally required to be disposed of at these facilities.
The sending, by governments, of waste that comes from the decontamination of land which was not able to be treated in situ.
The sending of inert waste items suitable for restoration, preparation or backfilling work and for building purposes.
The sending of waste resulting from treatment operations other than rejections of municipal waste, coming from facilities performing recovery operations other than intermediate treatment activities.

The chargeable event for the tax occurs at the point when the waste is landfilled or at the point when it is incinerated or co-incinerated at the facilities concerned.

The taxable person as taxpayer is whoever sends the waste to landfill sites or incineration or co-incineration facilities and, as taxpayer substitute, the managers of the landfill sites or incineration or co-incineration facilities.

The taxable amount is calculated by reference to the weight, measured in metric tons (Tm) expressed in figures with up to three decimal places, of landfilled, incinerated or co-incinerated waste, and will be determined for each facility where the activities constituting the chargeable event for the tax are performed.

The gross tax liability is calculated by multiplying the taxable amount by a proportional rate varying according to the type of waste (between 0 and 40 euros per metric ton).

The autonomous community governments may increase these rates for the waste landfilled, incinerated or co-incinerated in their respective areas.

Taxpayer substitutes will have to charge the chargeable amounts to the taxpayers for the tax, who will be required to pay those amounts. This charge is made on the invoice as a separate item.

The charge mechanism will not be required in cases of assessments by the tax authorities and where the taxpayer has to file a self-assessment for the tax.

3. Other amendments

a) Local authority levies on waste management

Local authorities will have to impose, within three years, a fee or, otherwise, a specific, separate and full-cost charge that is not a tax, which will allow pay as you throw schemes to be set up, and will reflect the real, direct and indirect cost of waste collection, transportation and treatment systems, including (i) the monitoring of these operations, and post closure maintenance and monitoring of landfill sites, (ii) awareness raising and communication initiatives, as well as (iii) the revenues obtained from implementing extended producer responsibility, from the sale of materials and energy.

b) Charge (“canon”) on the use of inland water for electricity generation

Transitional provision one of Law 15/2012 of December 27, 2012 on tax measures for energy sustainability is repealed along with a few implementing regulations on this charge, and new wording is given to article 112 bis of the revised Waters Law.

c) VAT: Amendment of the rules on gifts of products

To facilitate gifts of products to the not-for-profit entities under Law 49/2002 of December 23, 2022 on the tax regime for not-for-profit entities and on tax incentives for patronage, the law provides for the following:

Taxable amount: the taxable amount of gifts for VAT purposes is the value of the goods at the time of supply, after including any changes to their value as a result of use, impairment, obsolescence, debasement, appreciation or any other cause. As a new provision, a complete impairment loss is to be presumed in relation to supplies to the not-for-profit entities referred to above, wherever the goods are used for their public benefit purposes (in other words, the taxable amount for the self-supply is zero).
Tax rate: goods of that type supplied as gifts are zero rated in all cases, which ensures that the right to deduct the tax as a result of making the gift is not restricted in any way.