Serbia is overhauling its excise tax laws, marking a significant policy shift for novel tobacco products. The Ministry of Finance recently announced comprehensive reforms set to take effect in January 2026. This move signals an end to the preferential tax treatment that products like heated tobacco have enjoyed, aligning their tax rates more closely with traditional cigarettes. For consumers and manufacturers, these changes will reshape the market landscape for alternative tobacco products in the years to come.

This article will break down the key aspects of Serbia’s new excise tax regulations. We will explore the specific changes for heated tobacco, shisha, and herbal products, examine the expansion of the tax base to include other nicotine products, and discuss the new reporting requirements designed to enhance compliance. Understanding these reforms is crucial for anyone involved in the alternative products market in the region.

Raising Taxes on Alternative Tobacco Products

The centerpiece of the reform is the substantial tax increase on alternative tobacco products. Under the new legislation, products such as heated tobacco (HNB), shisha tobacco, and herbal smoking products will face a significant hike in their tax burden.

Previously, these products were taxed at 40% of the minimum excise duty applied to traditional cigarettes. The new law eliminates this favorable rate. Starting in 2026, these novel tobacco products will be taxed at 100% of the minimum cigarette excise tax. This change effectively removes the tax incentive that made these alternatives more affordable for consumers compared to conventional cigarettes.

The government’s primary goal with this policy is twofold. First, it aims to increase state revenue. As a growing number of consumers switch from traditional cigarettes to these newer products, the state has seen a corresponding drop in tax income. By harmonizing the tax rates, the government hopes to capture revenue from this expanding market segment. Second, the reform aligns with broader public health objectives by discouraging the use of all tobacco and nicotine products through higher pricing.

Expanding the List of Taxable Goods

Beyond just increasing rates on existing products, the reforms also broaden the scope of what is subject to excise tax. The updated regulations now include several product categories that were not previously taxed in the same manner.

The expanded list of taxable goods now covers:

• Nicotine Pouches: These popular oral nicotine products will now be subject to excise duty, bringing them in line with other tobacco and nicotine alternatives.
• Biofuels and Bioliquids: The inclusion of these products reflects a wider effort to regulate various consumer and industrial goods under the excise tax framework.
• Natural Gas: Similar to biofuels, taxing natural gas under this system is part of a broader fiscal strategy.

By extending the tax net, the Serbian government is creating a more comprehensive and uniform approach to taxing goods that have fiscal or public health implications. This expansion ensures that as consumer habits evolve and new products emerge, the tax system can adapt accordingly.

Enhancing Tax Compliance and Reporting

To support these significant changes, the reforms also introduce stricter administrative and reporting requirements. The goal is to improve the accuracy of tax collection and enhance the digital tracking of taxable goods.

The key changes to the reporting process include:

• More Frequent Submissions: Taxpayers will now be required to submit excise tax returns twice a month, a notable increase from the previous schedule. This allows for more timely monitoring of tax liabilities.
• Updated Declaration Forms: The tax declaration forms have been revised to include new reporting codes and fields. These additions are designed to capture more detailed information about the products being sold, improving data accuracy and traceability.

According to officials, these procedural updates are essential for strengthening tax compliance. The increased frequency and detail in reporting will provide the government with better oversight of the market, helping to ensure that all due taxes are collected efficiently. These measures are also aligned with the government’s broader goals of digitalization and fiscal responsibility.

The Road Ahead for Serbia’s Tobacco Market

Serbia’s decision to eliminate tax breaks for novel tobacco products represents a major shift in its fiscal and public health strategy. By aligning the tax rates of heated tobacco, shisha, and other alternatives with those of traditional cigarettes, the government is leveling the playing field and aiming to boost state revenue. The expansion of the tax base and the introduction of more rigorous reporting requirements further underscore a commitment to a more robust and modern tax system. As these reforms roll out, both consumers and businesses in the alternative products sector will need to adapt to a new economic reality.