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Amendments to the Excise Act – summary of planned changes part 1

On August 22, 2022, the Ministry of Finance published on the website of the Government Legislation Center a draft law on amendments to the Excise Tax Law and certain other laws (hereinafter: “Draft”). Currently, it has already been referred to the first reading in the Sejm and the further legislative process can be followed at this link.

Below is part one of a set of significant planned amendments to the Excise Law, which, for the most part, are expected to take effect as early as January 1, 2023.

Clarification of the authority’s local jurisdiction over the movement of excise goods and monitoring of the sale of coal products

The new regulations are intended to clarify the issue of the tax authority’s local jurisdiction over the movement of excise goods and monitoring of the sale of coal products using the System. After the changes, it will be determined then with regard to the place where the activities subject to excise duty are performed or the occurrence of facts subject to excise duty. On the other hand, for movements of excise goods made without using the System, the jurisdiction will be determined according to the general rules.

Registration submissions to the Central Register of Excise Entities (CRPA).

The proposed legislation also provides for the extension of exemptions from the obligation to submit a registration declaration to the Central Register of Excise Entities to local government units (hereinafter: ‘LGU’).

The problem to date has been the incompatible position of the tax authorities and the Ministry of Finance. The tax authorities have adopted the approach that, in the case of consumption of goods exempted by purpose, it is the consuming entities, i.e. organisational units of LGU are obliged to register with the CRPA. Thus, the obligation to register should apply to, for example, schools or kindergartens, and not the municipality as a single, overall entity. In contrast, a different view was presented by the Ministry of Finance, which indicated in its letter that it is the LGU that is obliged to register with the CRPA (i.e. the municipality) and not its organisational unit.

By the way, such a view had no basis in the current excise legislation and probably resulted from the transposition of VAT regulations and case law to excise. This dispute has generated numerous problems among those obliged to register since the mandatory registration came into force. The planned introduction of the exemption is to apply only to the production of electricity from renewable energy sources up to 1 MW of the rated capacity of the installation.

However, the 1 MW generator capacity limit is to be counted separately for each organisational unit – using the principle of determining the total capacity of generators within a given organisational unit. For example, for a given LGU, the limit will be counted separately for a school or kindergarten and up to 1 MW exemption can be applied for each of them.

For the purposes of the aforementioned provision, the Draft Law also introduces a definition of the local government organisational unit itself, which may significantly facilitate the identification of the registration obligation and the lack of the need to analyse separate provisions such as the Act on public finances or local government system acts. Thus, according to the Draft, organisational units of territorial self-government units are understood as:

  • self-government budget units set up by a territorial self-government unit or self-government budgetary establishments, and
  • municipal office, district office, marshal’s office.

However, according to the explanatory notes to the Draft Act, this provision will apply only to LGU which are subject to centralisation of VAT settlements, i.e.:

  • municipal office, district starost’s office, marshal’s office,
  • self-government budgetary units established by LGU,
  • local government budget establishments established by LGU.

Therefore, the provisions will not apply to other units created by a LGU, which in turn have the legal personality of a JST by force of law or when it has created (established) another unit having legal personality. Importantly, this unit will not be subject to centralisation of accounts and will account separately.

Intra-Community acquisitions of excise goods

With regard to further planned changes, they envisage a simplification of the submission of quarterly declarations concerning the intra-Community acquisition of excise goods declared from Annex 2 of the Excise Duty Act, which are subject to zero excise duty and are outside the excise duty suspension arrangement. It may be inferred that the planned changes will simplify the obligation to submit declarations due to the possibility of using a single model declaration submitted for quarterly periods and not, as was previously the practice, i.e. the need to submit a separate AKC-UAKZ declaration for intra-Community acquisition of excise goods subject to a zero excise duty rate outside the procedure. Such a change can therefore be regarded as particularly beneficial due to the possibility for the taxpayer to show the exempted goods in the same declaration.

The taxpayer will be obliged, without being requested by the tax authority, to submit to the relevant head of the tax office tax declarations according to the prescribed form by the 25th day of the second month following the quarter in which the tax obligation arose.

Excise declarations – consuming entities

In view of the existing doubts about the interpretation of the obligation to submit excise tax declarations by economic consumption entities with respect to the consumption of excise goods listed in Appendix No. 2 to the Excise Duty Act subject to a zero excise rate the draft provides for the introduction of a provision entitling entities not to show consumption of these products in tax declarations.

According to the draft act, quarterly declarations are also not to be submitted by entities defined in art. 16 sec. 7a item. 1, i.e. producing electricity from generators with a total capacity not exceeding 1 MW, which is consumed by these entities, provided that excise duty has been paid on the energy products used to produce this electricity in the amount due.

Record keeping and renewable energy sources up to 1 MW

According to the draft law, natural persons producing electricity from generators with a total capacity of up to 1 MW (which is consumed by these entities) still do not need to keep records if the excise duty due has been settled (which also means subjectively exempted).

Entities producing electricity from generators with a total capacity not exceeding 1 MW (which is consumed by these entities) with the amendment to the Act, will also not have to keep records. At the same time, however, they will be obliged to fulfil the condition that excise duty has been paid in the amount due on the energy products used to produce this electricity.

In addition, unlike under the current legislation, it will not matter whether the energy is supplied to interconnected and cooperating installations or not.

As a consequence, thanks to the amended legislation, records will also not be kept by many LGU due to the fact that the total capacity of generators will be determined separately for each of the LGU’s organisational units – subject to the aforementioned power threshold.

The legislator has also focused on simplifying the obligation to keep electricity records of entities producing electricity from renewable energy sources from generators with a total capacity not exceeding 1 MW that is consumed by these entities.

In the absence of metering equipment allowing for the precise determination of the amount of energy produced, the record-keeper will have to determine estimated amounts of energy, taking into account the information given on the nameplate of the renewable energy source installation or, if there is no nameplate, the active power rating of the generator set as determined by a unit accredited by the Polish Centre for Accreditation – in the case of a renewable energy source installation using biogas or agricultural biogas to produce electricity.

Due to the numerous difficulties in determining the amount of energy produced on the basis of a coefficient determined by individual devices, information on the capacity of the installation will therefore be used. This change will reduce the administrative burden on taxpayers.

Clarification of the definition of a standardised tank

In addition to the definition already in place, a standard tank is also considered to be a gas tank permanently fitted to a means of transport that allows gas to be used both for propulsion and for the operation during transport of the refrigeration system and other systems with which the means of transport may be equipped.

The additional concept introduced indicates that it is the legislator’s intention that the definition of standard tank should include not only a gas tank that is permanently fitted by the manufacturer to all motor vehicles of the same type as the vehicle in question, but also a tank permanently fitted by specialised companies.

Of course, these are not the only changes that the Draft Act announces – we will inform you about the remaining revolutions in excise duty we will inform you soon, in the next part of the article.