Current Topics in Excise Taxes
If you purchase, sell, or even manufacture disinfectants, have you ever thought about the possible consequences of excise tax on spirit? As a result of a decrease in the tax rate on diesel fuel, there may be confusion regarding the refund of the tax on these mineral oils. How to proceed when calculating the claim for the tax refund and how should it be reflected in the tax return?
Disinfectants – risks and potential obligations arising from the excise tax on spirit
Given the current epidemic situation, disinfectants have become an increasingly topical issue; most companies use them, for example, to disinfect their premises or provide them to their employees for use at work. Numerous companies have also started to manufacture disinfectants or included them in their range of products. For this reason, it is appropriate to think about potential obligations arising from the Act on Excise Taxes. In certain cases, it is also necessary to meet other obligations arising from other legal regulations; however, we do not discuss these in detail in this article.
As a general rule, for the manufacturing of disinfectants, it is possible to use generally (completely) denatured spirit, especially denatured and undenatured spirit. For the purchase of generally denatured spirit exempted from excise tax, it is not necessary to have any authorisation issued by the excise tax administrator; however, it is necessary to use such spirit for the purposes defined by legal regulations, which also includes the manufacture of disinfectants.
It is also necessary to hold a permit for the purchase of specially denatured spirit exempted from excise tax and, moreover, in this case, the denatured spirit must be used for the defined purpose and, at the same time, it must be denatured by a specific denaturant in the determined ratio. The purposes and the denaturation ratio are stipulated by Appendix no. 2 to Decree 141/1997 Coll.
In the case of undenatured spirit, its purchase in the Czech Republic is already subject to excise tax and the use of such spirit for the production of disinfectants will likely not be economically worthwhile. However, when it comes to the exemption from the excise tax, it may happen in practice that the undenatured spirit is imported from another EU member state and denatured in the Czech Republic. In such a case, the spirit would have to be imported under suspension of excise tax and placed to a tax warehouse after the transportation is completed, where it would be denatured.
In this context, we would like to note that if you purchase spirit from another EU member state, it is always necessary to pay increased attention to possible obligations, not only when you buy undenatured spirit. That is because in the case of purchasing denatured spirit, the relating obligations may differ depending on the product used to denature the spirit. The company may also be obliged to notify the tax administrator about the receipt of these products.
Green diesel – claim for the refund of mineral oil tax
Given the decrease in the tax rate on diesel fuel starting from 1 January 2021 about which we informed you in the previous article, there may be doubts regarding the calculation of the claim for the refund of the excise tax on mineral oils consumed in primary agricultural production or forest management, to which the taxable entity is entitled. That is because for these purposes, the taxable entity may have used mineral oils that were taxed at various excise tax rates, depending on the date when the diesel fuel was put into free circulation. The taxable entity may have also used unconsumed stock purchased in 2020.
The General Customs Directorate issued information on how the taxable entity should proceed in this case when calculating the claim for the refund of the excise tax. According to this information, diesel fuel put into free tax circulation in 2021 is designated by number 271085 and diesel fuel put into free tax circulation in 2020 is designated by number 971085. According to the General Customs Directorate, the taxable entity calculates the amount of the claim for the refund of the excise tax for these individual types separately and, at the same time, it will present this claim in the tax return separately on two lines.
Should you be interested in more detailed information, do not hesitate to contact us.