Starting from October 1, 2023, the new carbon tax toll named Carbon Border Adjustment Mechanism (CBAM) came into effect. In its initial phase, a transitional period will be in place until 2026, during which affected companies will be required to provide information to the European Commission through quarterly declarations. Starting from January 1, 2026, full implementation will occur with the effective application of a new environmental tax that will significantly impact European companies importing high-carbon-content products from outside the European Union. Furthermore, in 2025, these companies must register with the European Commission and obtain a unique number, which must be included in imports for customs control.
This CO2 tax has two key objectives. Firstly, it aims to combat climate change and reduce greenhouse gas emissions. Secondly, it intends to discourage the relocation of production outside the EU to countries with less stringent climate policies.
Products Affected by the Environmental Tax toll
Initially, this system will apply to products such as cement, aluminum, fertilizers, electricity production, hydrogen, iron, and steel. It’s essential to note that this list of products may gradually expand in the future as the system becomes operational. This tax will impact all imports, with the exception of those coming from Iceland, Liechtenstein, Norway, and Switzerland, countries that are part of the European Emissions Trading System.
Administrative Burden and Mandatory Reporting
The CBAM will entail a significant administrative burden for companies. Starting from October 1, importing companies will need to obtain detailed information about imported products from their suppliers and submit quarterly reports to the European Commission. The information to be obtained includes details such as the place of manufacture, production methods, the number of associated emissions, and whether the country of origin has an emissions pricing policy in place.
Impact on Businesses and Additional Costs
The collected information will be used to calculate the additional costs that importing companies will have to bear when bringing goods into the EU compared to their production within the European Union. Additionally, if the country of origin already applies an emissions surcharge, importing companies can deduct it from their declaration.
The implementation of this new CO2 tax toll will result in increased costs for products and goods, which could be reflected in the final product prices and ultimately affect consumers.
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At Feliu N&I, we provide tax, accounting, and business internationalization advisory services. Contact us for guidance on how to navigate these tax and environmental changes.