In April, the Supreme Administrative Court ended a tax dispute, which had been going on since 2020, when the customs a assessed additional excise tax to the Jarošov brewery in the amount totalling almost CZK 1 million. The administration concluded that the Jarošov brewery did not meet the conditions for a reduced rate of excise duty. The brewery filed a legal action against this decision. The dispute continued until this April, when the Supreme Administrative Court ruled in favour of the brewery. You can learn more about the course of the whole dispute and the basis of arguments of both parties in our article.
Initially, let us briefly review the general rules on excise duty applicable to beer. A standard rate is in the amount of CZK 32/hl. The reduced rate of excise duty may be applied by a taxpayer if the following two conditions are met:
Why did the customs authorities decides on additional tax assessment?
In 2020, the customs authorities concluded that the Jarošov brewery was legally and economically dependent on the Znojmo Municipal brewery; therefore, it did not meet one of the conditions for the application of the reduced rate of excise duty. According to customs officers, beer produced should not have been taxed using the reduced rate of excise duty on beer but rather using the standard rate. As a result, customs authorities then assessed the brewery with additional excise duty in the amount of almost CZK 1 million.
The point of disagreement was only one word that was added when the European directive was transposed into Czech legislation. While the European directive states that “if two or more small breweries cooperate, and their combined annual output does not exceed 200,000 hl, these breweries may also be considered a single small brewery”, the Czech act has the extra word “independent” in the first part of the sentence: “If two or more small independent breweries cooperate, and their combined annual production does not exceed 200,000 hl, these breweries are considered a single independent brewery.”
Decision of the Supreme Administrative Court
However, according to the Supreme Administrative Court, to which the brewery appealed after it did not succeed with the legal action at the Regional Court in Brno, the relevant passage of the act, on the basis of which customs authorities acted, was incorrectly transposed from the European directive and was, according to said court, an “oversight by the legislator”. Although the Supreme Administrative Court did not question the dependence of the Jarošov brewery on the Znojmo Municipal brewery or the possibility of stricter implementation of the EU Directive, it ruled that cooperating small breweries (output may be combined) cannot be favoured over economically dependent ones (output may not be combined). Therefore, the Jarošov brewery is entitled to the reduced rate of excise duty, and it does not have to pay additionally assessed excise duty.
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