Due to the popularity of the product in recent months, there has been an increasing number of individuals wanting to get into the CBD business.
With a turnover of around €100 million in Europe alone, the CBD business has been booming. An increase in tax of up to 50% could however change this and potentially even lead to fatal consequences for the currently still relatively new sector in Luxembourg. Up until now, CBD has been taxed at the same rate as tea, notably the standard 3% tax on food items. Starting 1. December, an increase to 33% will be applied, along with 17% VAT.
This decision has hit small businesses rather hard, with new shops having to register foundations that require a toll free stock. There is some uncertainty around how these businesses are going to afford this, according to cannabis foundation's president Christophe Zimmer.
In light of the growing number of investments in the CBD business, the new tax implementation is particularly problematic for young businesses that have recently signed a three or four year lease.
Whilst this new denomination did not come out of the blue, it did come much sooner than expected. Zimmer says that for all the formalities relating to paperwork to be in order, at least one to two months are usually required. In this case, affected businesses were only informed of the change two months before it will be put in place. The association also says it is unclear why the tax will have to applied at such short notice.
The purchase price for a kilogram of cannabidiol generally lies around the €2.500 mark. One gram is then usually sold for an average price of €10, with a marginal revenue of €8 per gram. However, this amount will fall below €2 or €3 from 1. December. The risk will not only affect the business but also the product itself.