Kofax has closely been following developments relating to the Carbon Border Adjustment Mechanism(CBAM) since the turn of the year. The European Commission has now adopted and published the reporting obligations covering the transitional phase of the tax. This phase will commence on 1 October 2023 until the end of 2025.

The transitional phase is expected to allow business to adapt to the new demands of the tax, which are expected to present more onerous burdens from 2026.

In the transitional phase, impacted entities will be subject to somewhat limited obligations, with a focus on reporting emissions associated with impacted imports, without making any corresponding payments.

Although data is required to be collected in Q4 2023, the first report will need to be submitted sometime later, by 1 January 2024.

You can read more about the transitional phase reporting obligations via the European Commission guidance here. As is the case with the introduction of new taxes, there are a lot of practical considerations to take into account which the guidelines incorporate, including the calculation of carbon emissions. The European Commission has also captured some of the logistical issues around the new tax here.

Calculating and reporting the tax can be complex- and the wider project team associated with the project are currently considering the role of IT systems to facilitate this procedure. More widely, support and further guidance is being considered so impacted entities can adapt to the demands of the new tax.