Reform of tobacco product taxation in the EU: what (really) changes for businesses and the market

If adopted, the new excise directive will start to apply from 2028, raising EU minimum rates and also including the “new” nicotine products. Here is a practical guide – designed for manufacturers, importers, distributors and retailers – to understand the Commission’s proposal (July 2025) and prepare in advance.

Historical background
On 9 December 2024, 16 Member States called for the modernisation of the TTD to include new products. In May 2025, a subsequent letter signed by 15 countries urged the Commission to present the review proposal without further delay.
On 16 July 2025, the European Commission therefore presented the proposal for a recast of the Tobacco Taxation Directive (TTD). The proposal expands the scope of the directive to also include electronic cigarettes and nicotine pouches, introducing minimum excise rates for these products.
Concerns nevertheless remain among some Member States and across the various supply chains regarding the possible impact on local industries, inflation and illicit trade.
Directive 2011/64/EU (TTD) harmonised the structure and minimum excise levels on cigarettes and smoking tobacco, but does not adequately cover e-cigarettes, heated tobacco and nicotine pouches. In line with the EU Beating Cancer Plan, the Commission proposed in 2025 a far-reaching revision, with entry into application envisaged from 2028.

Why a revision is needed

• Divergences between Member States: wide tax gaps fuel cross-border shopping and market distortions.
• New products without a common framework: misaligned tax treatment for e-liquids, heated tobacco and pouches.
• Public health objective: higher prices are expected to lead to lower consumption, especially among young people.

The pillars of the 2025 proposal

Extension of scope
Within the TTD, e-cigarettes, heated tobacco, other manufactured tobaccos and nicotine pouches are included, with harmonised definitions and new minimum excise levels.

Increase in EU minima and indexation

• Divergences between Member States: wide tax gaps fuel cross-border shopping and market distortions.
• Dynamic updating: indexation to the HICP (EU inflation) every 3 years + PPP (purchasing power) adjustment to reduce national disparities
• Gradual convergence (up to 4 years) for products that are currently less taxed (cigarillos, fine-cut, waterpipe tobacco, heated products, etc.).

Control of raw tobacco
Extension of EMCS (excise movement and control system) to raw tobacco as well, in order to monitor intra-EU movements and reduce infiltration into the illicit market.

Practical impacts for operators

Manufacturers, distributors and retail

• Review pricing, product mix and margins, taking into account the increase in minima and the time scale for convergence.
• Supply-chain compliance: extend internal track & trace systems in view of EMCS coverage for raw tobacco.
• Cross-border: convergence of minima aims to reduce cross-border shopping and distortions between border-area retail outlets.

E-liquids (with and without nicotine) and e-cigarettes

• Key development: EU-wide harmonisation of tax treatment that has so far been fragmented.
• The proposal extends the scope to liquids for e-cigarettes, likely including those without nicotine; in many Member States this could translate into harmonised minimum excise duties also for “0 mg/ml” products.
• Substitution risk: the design of minima is intended to prevent “down-trading” (shifts towards cheaper products).

Nicotine pouches
Entry into the excise framework with specific definitions and EU-wide minima: tax labelling, pricing and distribution contracts will need to be adjusted.

Timeline and institutional process
Application from 2028 is what the Commission has proposed; the actual timetable will depend on the outcome of negotiations in the Council (which requires unanimity) and on transposition into national legal systems.

• Commission proposal: July 2025.
• Estimated entry into application: from 2028, with transitional periods (e.g. 4 years for some categories) for full convergence of minima
• In parallel: assessment of the broader tobacco control framework (TPD + advertising), with results expected in Q2 2026.

Note on the revision of the Tobacco Products Directive (TPD)
According to the latest indications, the new TPD is “planned” for adoption in Q1 2026 (a timeline that has already slipped several times). Other analyses foresee completion of the review by mid-2026. In any case, deadlines remain uncertain and still need to be assessed in practice.

As of today (November 2025), the Commission is still working on the evaluation of the TPD framework and the advertising directive; according to the latest indications, the proposal is “planned” for Q1 2026 (a timeline that has already slipped several times). Other analyses foresee completion of the review by mid-2026. In any case, deadlines remain uncertain and still need to be assessed in practice.