The Recovery Package in the context of tax changes
Following the Government announcement on the Recovery Package, the related amendment to the tax regulations was published. Below we summarise a selection of the most important changes in this area.
The area of excise duties is expected to undergo significant changes in the future. From 1 January 2022, an amendment to the Excise Taxes Act should take effect. From 13 February 2023, a new excise directive will take effect at the EU level, which overhauls the directive still in force. Below you will learn what areas will be affected by the changes.
Currently, a draft amendment to the Excise Taxes Act, which should apply from 1 January 2022, is in the comment procedure. The amendment introduces relevant EU rules on the taxation of alcohol and alcoholic beverages. Among other things, the amendment also includes the treatment of selected products intended for the purpose of defence efforts.
Summary of the most significant changes
a) Change in the nomenclature code for the tax on alcohol, beer, wine and intermediate products
A very significant change should concern changes in nomenclature codes for the tax on alcohol, beer, wine and intermediate products. At present, the Excise Taxes Act in these cases is governed by the Council Regulation on the Tariff and Statistical Nomenclature and on the Common Customs Tariff, as in force on 1 January 2002. Under the proposed amendment, the nomenclature codes will be updated to the version in force on 1 January 2019. The nomenclature codes for the purposes of the mineral oil tax shall remain unaffected.
b) Certificate for the purposes of application of the reduced tax rate
The draft amendment also plans to introduce issuance of a certificate in order to demonstrate entitlement to the application of the reduced tax rate. This certificate will have a uniform format within the EU.
According to the proposed version of the amendment, the taxpayer will be able to ask the tax administrator to issue a certificate confirming that they meet all the conditions for a reduced tax rate. The taxpayer shall subsequently present the obtained certificate in another Member State to which the selected product is imported in order for a reduced tax rate to be applied in that Member State.
The amendment concerns taxpayers who meet the characteristics of a small independent brewery and a small wine producer. However, the new provision introduces a procedure and conditions for obtaining a certificate for taxpayers who transport their products to another Member State, which applies a reduced rate of excise tax in areas other than beer and wine only. These are small independent producers of alcohol, small independent producers of other fermented beverages and small independent producers of intermediate products. These new institutes do not mean the introduction of reduced tax rates in the Czech Republic, however, the certificate obtained by the taxpayer will ensure that they are not disadvantaged in another Member State compared to domestic tax entities.
Furthermore, the draft Act stipulates that this certificate must be an annex to an accompanying electronic document relating to the selected products transported from the Czech Republic to the tax territory of another Member State.
Even in the case of transport of selected products from another Member State to the tax territory of the Czech Republic, a certificate will be required for the purposes of applying the reduced tax rate (if an entity from another Member State meets the conditions of a small independent brewery or a small wine producer). For this purpose, the Czech Republic will accept a similar certificate issued in another Member State.
c) Determination of the subject matter of the tax on beer
Furthermore, the proposed wording of the Act adds to the definition of the subject matter of beer tax that for the purpose of the method of determining the extract of the original wort, all components of beer are taken into account, including those added after fermentation. In the past, the judicial decisions have shown that additives (sweeteners, flavourings) added to beer do not affect the calculation of Plato grades (judgment C-30/17). The proposed amendment completely denies this approach and stipulates that all beer components should be taken into account for the calculation of Plato grades.
Directive 2020/262/EC on the general treatment of excise duties will replace Directive 2008/118/EC from 2023. Subject to certain transitional provisions, the new regulation will be effective from 13 February 2023. Member States are required to adopt the legislation by 31 December 2021 to comply with the new adaptation of Directive 2020/262/EC.
The new Directive adopts some of the provisions without changes, but there is a significant overhaul in some areas. In general, the new Directive seeks to strengthen powers at the EU level and to increase harmonisation in the field of excise taxes. Furthermore, in certain areas, the Directive is being linked to the Union Customs Code.
Summary of the most significant changes
a) New concepts of “certified consignee” and “certified consignor”
One of the very important changes concerns the introduction of new concepts of “certified consignee” and “certified consignor”. These concepts must be distinguished from the existing terms “registered recipient” and “registered sender” (according to Czech legislation the authorised recipient and sender), which will still be in force. For transport between Member States, registered consignees and registered consignors accept/dispatch selected products under suspension arrangements. In contrast, in the context of transport between Member States, certified consignees and certified consignors will dispose of the selected products in free circulation (not under the suspension arrangements).
Thus, it follows from the new Directive that goods released for consumption in one Member State, which are held for business purposes in another Member State to be subsequently delivered or used there, will be allowed to be transported within those Member States only by persons with the status of certified consignee and certified consignor unless these persons meet exceptions determined by the Directive. Registration will therefore be required for this purpose. Furthermore, these transactions will be subject to reporting in the EMCS electronic system.
b) Distance selling
Further changes occur in situations where the goods have been released for consumption in the territory of one Member State and have been purchased by a person who is not an authorised warehousekeeper, registered recipient or certified consignee, but that person is established in another Member State and does not carry out an independent economic activity. Where such goods have been dispatched to another Member State directly or indirectly by a consignor who carries out an independent economic activity, the goods shall be subject to excise tax in the Member State of destination. The tax in this state will be paid by the consignor. Under the new rules, in these situations, the consignor will no longer have to pay tax through a representative but will be able to do so itself.
c) New arrangements for the partial loss of goods during transport between Member States
Furthermore, the Directive introduces a completely new treatment of partial loss of goods caused by the nature of the goods and incurred during the transport of goods to the territory of a Member State other than that in which they were released for consumption. Under this new treatment, in the state where the loss occurred, excise tax shall not be collected if the amount of the loss does not exceed the common partial loss threshold for the relevant goods. These thresholds for individual goods shall be determined by the European Commission and shall be adopted by the Member States unless they have reasonable grounds for suspecting fraud or irregularity in this area.
d) Loosening of rules in the field of energy products transported by fixed pipeline
Under the new Directive, the provision of tax collateral in the case of the transport of energy products by fixed pipeline will no longer be required under the suspension arrangements. The European Commission does not consider this area to be risky, so it introduces the regulation but leaves the exemption to require the provision of the tax collateral in duly justified cases.
We will keep you informed about further developments in this area according to the current situation. If you have any questions about the above issues, do not hesitate to contact us.
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