LOSSES OF ALCOHOL IN DUTY SUSPENION REGIME WHEN SELLING TO POLAND – WHO SHALL PAY THE EXCISE DUTY?

Entrepreneurs sending alcohol under the excise duty suspension procedure from Poland to other EU countries, as well as from other EU countries to Poland, face interpretation doubts as to the entity obliged to pay excise duty for losses of excise goods.

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In this context, it should be noted that the excise duty suspension procedure is the procedure applicable during the production, including processing, or warehousing, including storage, or transhipment and movement of excise goods. Thanks to it, it is possible to postpone the payment of excise duty when the conditions specified in the regulations are met.

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In turn, losses of excise goods in the context of this article will be losses (losses) of alcohol arising under the excise duty suspension procedure.

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In order to answer the above doubts, it is necessary to first conduct an appropriate analysis of the provisions of Council Directive (EU) 2020/262 of 19 December 2019 laying down the general arrangements for excise duty (recast) (hereinafter: Directive), which indicates in Art. 9 par. 2 that where an irregularity has been detected during a movement of excise goods under a duty suspension arrangement, giving rise to their release for consumption (the departure of excise goods, including irregular departure, from a duty suspension arrangement), and it is not possible to determine where the irregularity occurred, it shall be deemed to have occurred on the territory of the Member State in which and at the time when the irregularity was detected.

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In turn, Art. 7 par. 1 point a) (ii) of the Directive indicates that the person liable to pay the excise duty that has become chargeable shall be in relation to the departure of excise goods from a duty suspension arrangement in the case of an irregularity during a movement of excise goods under a duty suspension arrangement as defined in Article 9 par. 1, 2 and 4: the authorised warehousekeeper, the registered consignor or any other person who guaranteed the payment in accordance with Article 17(1) and (3) and any person who participated in the irregular departure and who was aware or who should reasonably have been aware of the irregular nature of the departure.

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On the other hand, Article 13 par. 1 point 3 of the Polish Excise Tax Act stipulates that an excise taxpayer is a natural person, a legal person and an organizational unit without legal personality that performs activities subject to excise taxation or in relation to which a factual situation subject to excise taxation has occurred, including an entity at which losses of excise goods occur or there has been a complete destruction of excise goods, also when it is not the owner of these excise goods.

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Therefore, excise regulations do not clearly indicate who is obliged to settle the tax for losses of excise goods occurring during their transport.

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However, the Polish tax authorities recognize that in such a case the sender is obliged to pay excise duty, and the country of taxation is the country of the recipient.

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This position was, for example, presented in "Response to the petition - application of the provisions on losses of excise goods by tax authorities" issued on 24 November 2022 by the Head of the National Tax Administration, ref. no.: DOM5.056.5.2022.KZM, in which it was indicated that: "The letter in question indicates that the consequence of the application of Art. 10 par. 2 [currently Art. 9 par. 2] of Directive 2008/118/EC2 is to recognize that the competent administration to investigate the matter and settle the losses incurred during the movement of excise goods under the excise duty suspension procedure between EU Member States is the administration of the country of the recipient of the goods, and the provisions on loss standards applicable in receiving country. The taxpayer is an entity from the Member State of dispatch of the excise goods, in relation to which the proceedings are conducted by the administration of the Member State of receipt of the excise goods.”

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Also, a similar position was taken by the Director of National Tax Information in an interpretation dated  20 November 2023, ref. 0111-KDIB3-3.4013.282.2023.2.JSU, who indicated that: "Accordingly, in a situation where excise goods are the subject of an intra-Community supply using the excise duty suspension procedure and shortages are found in the Member State to which the goods have been dispatched, they are subject to excise duty in that Member State according to the rules established in that State, and the taxpayer is the entity from the Member State of dispatch of the excise goods."

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The Director of National Tax Information also took an analogous position in an interpretation dated 25 October 2023, ref. 0111-KDIB3-3.4013.264.2023.2.AM.

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However, doubts may be raised if the delivery was made under the Incoterms Ex-Works rules, where the recipient bears the risk of shipping the goods to their destination.

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This issue, however, seems to have not been the subject of a broader analysis by the Polish tax authorities and they seem to still consider that the person liable to pay excise tax is the sender – even EXW terms of trade being applicable to the shipment, and the place of taxation is the recipient's country.

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Thus, bearing in mind the latest line of interpretation of the Polish tax authorities, it would be risky in the context of conducting a business activity to take a different position in which it would be the recipient of excise goods (alcohol) supplied under the excise duty suspension procedure who would be obliged to pay excise duty on losses of excise goods.

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However, in the case of a non-Polish EU taxpayer, it should be noted at the same time that the obligation to pay excise duty on losses of excise goods (alcohol) in Poland should, in principle, generate an obligation to register in Poland for excise duty purposes (including obtaining a Polish tax identification number).

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Practice shows, however, that in such a situation, the Polish tax authorities demand only that the excise tax is paid in the appropriate amount (including potential interest) and that the appropriate declaration be filled out in this regard – in paper form (which is in fact strange, as in general excise duty tax returns shall be filed electronically).

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Failure to fulfill the above obligation, in turn, could potentially result in criminal and fiscal liability in addition to the obligation to pay the required amount (including potential interest).

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The behavior of the tax authorities does not seem correct from the point of view of formal obligations related to excise duty, but it is widely used. The advantages of this solution certainly include the fact that in the case of small amounts, the taxpayer is not obliged to start the costly and time-consuming registration procedure, as well as the exclusion of formal obligations for already registered companies.

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Consequently, if you are selling alcohol to Polish customers in duty suspension regime even using EXW terms of trade, do not be surprised that if excessive losses of alcohol are disclosed at the destination, you will may be requested (even many years later) to pay excise duty to the Polish tax administration.