Market Overview

Swiss Court Slaps 25% Tax On Cannabis Flower

Swiss Court Slaps 25% Tax On Cannabis Flower

A court in Switzerland made things tougher for cannabis businesses by ruling that sale of cannabis flower should carry a 25-percent tax.

What Happened

In a March 11 decision, the Swiss Federal Administrative Court said that because the flower is smoked in a similar way to cigarettes, it should be taxes similarly.

Cannabis businesses in the country tried to persuade Swiss courts to levy the 12-percent tax imposed on tobacco products, but were unsuccessful. The cannabis flower will be taxed at 38 francs ($37.90) per kilogram, while the retail price will carry at 25 percent tax, the court decided. The ruling upholds a law that was put in place in 2017.

"On the side of the suppliers, the tax (25 percent + 8 percent of VAT on retail price) is to be paid monthly on the forecast of the coming month. This type of tax is killing small entrepreneurs. No other industry is due to pay taxes monthly," Jonas Duclos, Co-Founder and CEO of Swiss-based JKB Research SA told Benzinga.

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The decision regarding the 25-percent tax rate on the flower can be appealed to the Swiss Supreme Court.

"This kind of heavy tax sustains the black market, as it makes the price of legal products a lot less competitive," Duclos said.

Why This Is Important

Cannabis is mostly illegal in Switzerland due to its high THC content, but cannabis products -- including flower -- with less than 1 percent THC is legal and widely available for sale. People that need cannabis for medical purposes can be prescribed cannabis for 12 months, but the physicians need a special permit to issue the prescription. Cannabis can be

prescribed only in the form of tinctures and oil concentrates and only for patients with serious or terminal illnesses.

"By principle it's unfair to put CBD in the same box as tobacco. Tobacco is addictive with its nicotine, and also more harmful to health than CBD. The appeal was totally justified, and this is something that should be considered by the Supreme Court," Duclos said.

Duclos also pointed out that cannabis flower is not necessarily used for smoking, but can be used to make infusions or added to food.

One major cannabis company that has exposure to the Swiss cannabis market is Aphria Inc. (NYSE: APHA), which last year formed a partnership with Schroll Medical to cultivate and distribute cannabis in a number of markets, including Germany, Luxembourg and Switzerland.

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