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Resale of electricity to tenants, and excise taxes

Photovoltaic panels have long become an increasingly popular solution among building owners, including those for rent. The resale of the energy produced to tenants and its reinvoicing raise many questions among taxpayers regarding the tax consequences. In the following article, we will therefore outline the excise duties caused by the resale of energy from RES sources to tenants.

According to the Excise Tax Law, electricity is an excise product, so it is covered by the law. An excise tax payer can be a legal entity, but also a natural person who does not conduct any business activity. Tax liability arises at the time of sale of energy to the end buyer before an entity that does not have a license for its generation, transmission, distribution or storage.

As indicated in the Decree of the Minister of Finance dated 28.06.2021 on excise tax exemptions (Journal of Laws 2021, item 1178), taxpayers who generate electricity with generators whose capacity does not exceed 1MW and consume for their own consumption are exempt from the tax obligation. The obligation to submit tax declarations does not apply to non-business individuals who carry out activities in the field of excise goods subject to a zero excise rate or covered by an excise exemption. Moreover, the tax obligation for:

  1. The entity referred to in Article 16, paragraph 7a, item 1, with respect to the consumption of electricity produced by this entity from generators with a total capacity not exceeding 1 MW, provided that excise duty has been paid on the energy products used in the production of this electricity in the amount due,
  2. A consuming business entity with respect to consumption of excise goods listed in Annex No. 2 to the Law, subject to a zero excise rate

was also abolished with the amendment of the Law, which came into effect on January 1, 2023.

And here it should be noted that the exemption presented above applies to entities that consume the generated energy for their own needs. This is because the exemption does not apply at all to the resale of energy.

As we mentioned earlier, resale of energy to tenants and excise tax has repeatedly been the subject of tax interpretations and disputes between taxpayers and tax authorities. Contrary to many articles that confirm the interpretation of the law in favor of taxpayers, i.e. resale of energy is not subject to excise tax, unfortunately this is not the position that the line of jurisprudence and the correct interpretation of the law represent.

According to the Excise Tax Law, the sale of energy is a factual or legal act that results in the transfer of possession or ownership of the object of sale to another entity. The resale of photovoltaic energy to tenants, regardless of the form of documentation of the transaction and the calculation of its value, meets the conditions of the definition therefore it is an act of sale and subject to excise tax. In particular, the sale of energy cannot be ‘included’ in the price of a rental, which is clear both from the definition of sale in excise duty and from the fact that this tax does not provide for the taxation of services. The artificial transposition of the taxation conventions developed under VAT is therefore out of place here.

The interpretation of the regulations presented above has been confirmed by many interpretations (0111-KDIB3-3.4013.298.2023.2.JSU, 0111-KDIB3-3.4013.41.2023.2.JSU, 0111-KDIB3-3.4013.296.2023.1.MW) and in a letter issued by the Director of Tax Administration (DOP7.8101.4.2022).

The only situation in which the resale of energy to tenants would not be subject to excise tax is the lease of an office by a licensed entity, such as PGE.

If you need help with excise tax issues and more, you are welcome to contact the specialists at Nexia Advicero.