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The dynamic changes taking place in the alcohol industry market, involving a shift from traditional spirits to new types of products adapted to current consumer trends, give rise to both numerous doubts among alcohol producers and the need for the legislator to adapt legal and tax regulations to the dynamic changes in the market.
The nuances of the excise rules resulting from the dynamic development of the market cause considerable confusion among the entrepreneurs operating in it.
Long-standing dispute over flavoured beers
Doubts about the determination of the excise duty base of flavoured beers led to a long-running dispute between breweries and the tax authorities. The essence of this dispute was whether flavourings and sugar syrup added after fermentation of the beer should be added to the tax base.
According to the tax authorities, the excise duty regulations did not allow the quantity of extract added in the form of sugar syrup and sweeteners to be deducted from the extract of the actual finished product when calculating excise duty.
The producers of flavoured beers, on the other hand, disputed the authorities' position, pointing out, inter alia, that including non-alcoholic flavoured syrups in the excise duty calculation basis would lead to the taxation of substances which are not subject to excise duty.
These interpretative doubts led the Supreme Administrative Court (NSA) to refer a question to the Court of Justice of the European Union for a preliminary ruling on the interpretation of EU law.
In May 2018, in case C-30/17, the CJEU stated that only the extract of the basic wort should be taken into account when determining the tax base for flavoured beers, without taking into account flavourings and sugar syrup added after fermentation. This opened the way for brewers to claim a refund of excise duty unduly paid. Given that the right to reimbursement of the overpayment expires after a period of five years (counting from the end of the calendar year in which the deadline for reimbursement expired), for many taxpayers this may be the last chance to apply for reimbursement of the excise duty overpayment on flavoured beers.
Flavoured syrups without excise duty but refund of overpayment not so obvious
Although the refund of excise duty overpaid in this respect may have seemed obvious following the CJEU's ruling on the determination of the excise duty base for flavoured beers, the road to recovery for breweries has proved rocky.
Indeed, in a number of cases concerning the overpayment of excise duty on flavoured beers, the tax authorities began to argue that, although the tax had been overpaid, its economic burden had been passed on by flavoured beer producers to consumers - in the price of the beer.
As it currently stands, the provisions of the Tax Ordinance do not in any way make the refund of an overpayment dependent on its effective economic effects. Over the years, however, the jurisprudence of the administrative courts in this respect has been inconsistent. In a highly-publicised resolution of June 2011. (I GPS 1/11), the NSA refused to refund excise duty to electricity suppliers, indicating that they were shifting the burden of this tax onto consumers.
This resolution - despite the fact that it referred exclusively to electricity - has been applied more than once by tax authorities and courts. However, in the most recent jurisprudence relating directly to flavoured beers, the NSA excludes the possibility of making the refund of the overpayment dependent on its economic effect in the form of shifting the burden of the tax to the consumer, or the brewery bearing this burden.
It should be borne in mind that the legislator has repeatedly covenanted to make tax refunds conditional on the taxpayer actually bearing the burden of the tax - rather than 'passing it on' to another entity - usually the consumer.
Such an assumption already appeared in the originating 2017 draft of the Tax Ordinance prepared by the Codification Committee of the General Tax Law, and, in light of press reports, the legislator is now again trying to introduce the institution of unjust enrichment into the Tax Ordinance, within the framework of overpayment proceedings.
According to the draft proposals, a provision would appear in the Tax Ordinance, according to which a taxpayer would not be entitled to recover overpaid tax if he or she has not suffered a pecuniary loss from its payment.
Interestingly, the problem of unjust enrichment concerns not only excise duties. The NSA recently referred a preliminary question to the CJEU (I FSK 1225/18) as to whether overstated VAT on a fiscal receipt can be refunded to the entrepreneur. The question relates to a case in which a tax authority found the taxpayer's request for a VAT refund to be unjustified, indicating that the entrepreneur had not incurred an economic cost by transferring its value to the consumer in the price of the goods.
The inconsistent jurisprudence of the NSA and the proposals to introduce the institution of unjust enrichment into the Tax Ordinance lead to the conclusion that, in the future, recovery of the overpayment may be much more difficult than it is now, so there should be no delay in filing applications for the refund of the overpayment due.
New requirements for excise registers
Under current regulations, from 1 January 2023, all excise records kept on paper are to be replaced by electronic versions. Failure to comply with this requirement may result in penal and fiscal liability on the part of those responsible for tax issues in a given company. It is therefore important to prepare in advance for the upcoming changes.
It is worth recalling that, among others, the following entities will be obliged to start using electronic excise records, such as importers of alcoholic beverages, but also sellers of coal products of all kinds.
However, it should be noted here that records kept in electronic form must meet specialised requirements. Such records should:
- allow the content of the entries made to be consulted and ensure that the data stored is protected against distortion or loss;
- allow data to be corrected only with the annotation of the person making the correction and the date on which it was made;
- allow entries and reports to be printed, in chronological order;
- prevent the deletion of entries.
It is also important to integrate the excise records with the current accounting and warehousing systems in place at the given company.
Classification in alcoholic beverages - impact on excise duty
Due to the intensive development of the alcoholic beverages market, the boundary between traditional categories of alcoholic beverages is increasingly blurred. All sorts of ideas from producers who are looking for ways to make their offer more attractive can also influence the classification of individual alcoholic beverages and thus the amount of excise duty.
With regard to traditional products such as vodka, for example, we should have no doubts about the classification and thus the excise duty rate. In fact, the problem lies in the scope of products for which it is impossible to classify them into one or any category (mainly alcoholic beverages created by mixing different ingredients). Here, there may be a risk that the tax authority will always apply a higher excise duty rate and thus a tax arrears may arise against the entity that trades in the given alcoholic beverage on the national territory. This is why it is so important to confirm the classification in the form of administrative decisions issued by the competent authorities (so-called Binding Excise Information). This is the only way to secure one's excise tax position. This is also confirmed by the number of Binding Excise Notices issued recently in the area of alcoholic beverages.
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