Will the VAT Rate on Medical Cananbis and Hemp Products Increase from 8% to 23% in Poland

The Polish hemp market may soon face a serious challenge. The Ministry of Finance has announced plans to raise the VAT rate on hemp products from the current 8% to 23%. This change, included in the Council of Ministers’ work list, will cover products such as medical cannabis and hemp dried for smoking or inhalation.

This is a significant change that could significantly affect product prices and the situation on the market.

Scope of VAT change

The planned increase in the VAT rate applies to a wide range of hemp products, which are currently taxed at a preferential rate of 8%. In particular, it applies to products classified under the Combined Nomenclature CN 1211, such as dried hemp. The Ministry of Finance justifies this decision by the lack of grounds for further application of tax preferences for these goods, which is supposed to justify the need to increase the fiscal burden.

“Inclusion of the basic VAT rate on the supply of hemp products (Cannabis sativa ) – for smoking or inhalation without combustion (change in the content of item 9 of Annex No. 3 to the VAT Act). Currently, hemp (including dried products) classified in the Combined Nomenclature item CN 1211 is taxed at a VAT rate of 8% on the basis of item 9 of Annex No. 3 to the VAT Act. Since there is no justification for applying VAT preferences to this type of goods, it is reasonable to increase the rate of this tax for the supply of such goods from 8% to 23%,” according to the announcement of the Ministry of Finance.

Impact on the prices of hemp products

The increase in VAT to 23% means significant price increases, which may have a direct impact on consumer wallets. In particular, the prices of medical cannabis, which has gained popularity in Poland in recent years, may increase. The increase in tax burdens may affect the entire industry – from producers to retailers, and ultimately also patients, who already often have to face high treatment costs.

Importance for medical cannabis Patients

Data from the Ministry of Health show a dynamic increase in the sale of medical cannabis in Poland. In 2023, over 4.6 tons of this raw material were sold in Polish pharmacies, which is a significant increase compared to 1.2 tons in 2022 and only 33 kg in 2019. Higher prices may therefore limit the availability of this key drug for many patients, forcing them to incur even greater costs for treatment.

Industry reactions and opinions

The VAT increase has been met with mixed reactions among the cannabis industry. Producers and sellers fear that higher prices will discourage consumers, which could lead to a drop in sales. On the other hand, some experts point out that the industry may adjust its strategies, e.g. by introducing new products or changing pricing policies, to mitigate the effects of higher tax burdens.

Potential consequences for the grey zone

Higher prices for legal products may unfortunately lead to the development of a grey zone. Consumers who are unable or unwilling to pay higher prices may turn to illegal sources. The increase in VAT, while fiscally justifiable, carries the risk of deepening the problems associated with the illegal cannabis trade.

Summary and conclusions

The VAT increase on hemp products is a step that may have broad and far-reaching consequences for the market, patients and the entire hemp industry in Poland. Price increases, reduced availability of medical cannabis and the risk of the development of a grey zone are just some of the potential effects of this change.

In the face of the dynamic development of the hemp market in the world, Poland should strive for a prudent and balanced policy that will not only increase budget revenues, but also take care of the interests of patients and entrepreneurs.

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(Featured image by Tumisu via Pixabay)

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First published in FaktyKonopne. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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