Natural gas and other gas products: changes in the excise duty (Customs and excise alert 9/2013)
Work on excise duty on gas products (including natural gas) close to completion
On 27 September, Polish Sejm voted on Senate’s amendments to the amended Excise Duty Act introducing taxation of “gas products”. Thus, the final version of the new regulations is known. The draft has been sent to the President for signature. According to it, the amended act becomes effective as of 1 November 2013.
Gas products: more than natural gas
New excise duty principles regard all gas products used for heating purposes, which have been temporarily and unconditionally exempted from the excise duty until 30 October 2013. For this purpose, the amended version introduces a new class of excise goods: gas products. According to the definition, the excise goods include not only natural gas (CN 2711 1100) or wet natural gas in gaseous form (CN 2711 2100), as well as:
- coal gas, water gas, generator gas and similar assigned the code CN 2711 2100;
- other gaseous hydrocarbons in the form of gas (CN 2711 2900) and
- other heating fuels referred to in Article 89.1.15b, except from aliphatic saturated and unsaturated hydrocarbons (CN 2901 1000).
Special status for gas trading companies
In principle, the excise duty shall be payable only when the last transaction preceding consumption is concluded. Gas trading entities have been assigned a double status: an agent (PPG) and the final buyer (FNG). The fact whether excise is imposed or nor depends on the trader's status.
Among others; excise duty will be imposed on:
- domestic sales of gas product to FNG;
- intracommunity purchase and import of gas products by FNG;
- use of gas products by PPG and FNG.
In order to obtain a PPG status, an entity must notify the head of customs office about its intent to operate as PPG. Importantly, on the date following the date of amendment publication, provisions allowing entities such notification will come into effect. The impacted entities will actually have to make the notification before performing first transactions on gas products subject to excise duty after 1 November 2013. Otherwise they may be obliged to pay the excise duty on these products.
The amendment includes an extensive list of exemptions for gas products if used for specified purposes, such as electric power generation, manufacturing of energy products, cogeneration, mineralogy, electrolytic and metallurgic processing and in chemical reduction.
Gas products intended for heating in energy-intensive plants that have implemented pro-ecological or energy efficiency improving systems shall be exempted as well.
Energy-intensive plant vs. gas: changing definition
Definition of an energy-intensive plant has evolved in the course of drafting the amendments. Initially, an energy-intensive facility was defined as an entity where the share of natural gas acquisition in the value of sold production equalled not less than 10% per annum. Finally, the limit was set on the 5% level. Nevertheless, the exemption is much less liberal than permitted by EU regulations.
In most cases, it additionally depends on a provision that the gas products shall be used for purposes allowing the exemption, included in a contract between the buyer and the seller. Contracts concluded prior to 1 November 2013 may be adjusted to the requirement by 30 June 2014. New contracts will have to follow amended templates and procedures.
Excise on gas: how to begin preparing for changes
Companies should promptly analyse gas products they buy, consume and sell, as well as any gas produced in the course of technological processes for compliance with definition of gas products. This is the first step to determine effects of amending the act. Since the amendment is broadly known, companies may also check whether they meet the definition of an agent (PPG) or will perform operations subject to excise, and if so, whether they can apply for an exemption.