PM · 10-Q · 2026Q3 · Full report

German Heated Tobacco Tax

Philip Morris International Inc. · 2026-10-23 · Importance 32 · Surprise 24

Germany’s supplemental excise surcharge on heated tobacco products, effective since 2022, has negatively affected PMI’s International Smoke-Free net revenues, which reflect the surcharge as a reduction. The Court of Justice of the European Union and the Dusseldorf Fiscal Court ruled in 2024 that the regulation does not contravene EU law; PMI appealed to the Federal Tax Court on June 19, 2024, and the appeal remains unresolved. PMI paid EUR 721 million (approximately $751 million), excluding accrued interest, on January 14, 2025, to avoid future interest while the appeal proceeds. An unfavorable ruling could reduce future operating cash flow through unpaid interest, while a favorable ruling could benefit operating results and cash flow for the amount paid.

Key facts

• On January 14, 2025, Philip Morris International Inc. elected to pay EUR 721 million (approximately $751 million), excluding accrued interest, outstanding under the German heated-tobacco surcharge to avoid future interest. source
• PMI paid approximately $0.8 billion in January 2025 for the disputed German supplemental tax surcharge on heated tobacco products to avoid future interest. source
• On March 14, 2024, the CJEU ruled that Germany's additional excise tax on heated tobacco products did not contravene EU law; on May 15, 2024, the Dusseldorf Fiscal Court reached the same ruling and admitted an appeal to the Federal Tax Court, which Philip Morris International Inc. filed on June 19, 2024. source
• In August 2024, German authorities assessed EUR 151 million (approximately $176 million) in excise tax against Philip Morris International Inc.'s German subsidiary after classifying TEREA consumables as cigarettes; the assessment covered February 15, 2023 through August 1, 2024. source
• Philip Morris International Inc.'s German subsidiary paid the $176 million excise assessment in April 2025 while challenging the classification decision in court, then requested withdrawal of the proceedings on September 17, 2025. source
• Philip Morris International Inc. expects the negative impact of the German heated-tobacco surcharge to continue at least until the appeal ruling on its legality is concluded; it accounts for the surcharge as a reduction in net revenues. source
• An unfavorable outcome in Philip Morris International Inc.'s German surcharge appeal would negatively affect future operating cash flow by unpaid interest; a favorable outcome would positively affect future operating results and operating cash flow for amounts paid in January 2025. source
• PMI's German affiliate appealed the dismissal of its challenge to the additional heated-tobacco excise tax to the Federal Fiscal Court on June 19, 2024. source