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Excise duty on natural gas (Customs and excise duty Alert – 1/2013)

Changes in excise duty in 2013

Excise duty on natural gas comes into effect in November

The Ministry of Finance has published draft amendments to the Excise Duty Act concerning duty on natural gas used for heating purposes. Poland is under an obligation to introduce changes in this respect into the legal regime, because  the exemption from excise duty for natural gas intended for heating purposes (Article 163.2 – Article 163.4 of Excise Duty Act) ceases to apply as from 31 October 2013.    Until that date Polish legislators should implement the EU regulations regarding excise on gas (especially the regulations of Council Directive 2003/96/EC).     The amended law is to come into force on 01 November 2013.


Excise exemptions on natural gas

The draft law provides for a wide range of excise exemptions for natural gas. They include  both compulsory and non-compulsory exemptions prescribed in EU law.   According to the draft, considering the purpose of using natural gas, the following uses of gas for hearing purposes are exempt from excise: (i) in the process of producing electric energy, (ii) in the process of producing energy products, (iii) for passenger and cargo rail transportation, (iv) for production of power and heat in cogeneration, (v) in farm work, (vi) in horticulture, (vii) in fishery and forestry, (viii) in mineralogical processes, (ix) in electrolytic processes, (x) in metallurgy, (xi) in chemical reduction.      The use of gas for heating purposes by energy-intensive facilities that have introduced measures aimed at environmental protection purposes as well as use of such gas by specific types of users (households, public administration authorities, hospitals, outpatient clinics, public benefit organizations) will also be subject to exemption.

Even though the wide range of the introduced exemptions should be seen as an advantage, certain aspects of the new law are disputable. In particular, the definition of an energy-intensive facility is a case in point here.  Based on the draft legislation, an energy-intensive facility is an entity where the share of natural gas acquisition in the value of sold production equals not less than 10% per annum.    This definition may trigger certain controversies, as it is possible under the directive to introduce a 3% limit of the share of natural gas acquisition in the value of sold production, which would be much more beneficial.  In effect, the draft legislation could lead to a situation where the Polish entities would be at disadvantage on the European market.

The requirement of introducing measures aimed at environmental protection purposes or improvement of energy efficiency also appears vague.  As is the case with the excise regulations on coal, it may prove necessary to apply to the Ministry of Finance for an individual tax ruling to determine whether the systems operating in a specific enterprise meet the definition above.     


Effective date of new excise regime

The Ministry of Finance indicates that some of the new regulations (especially those concerning the institution of an interim gas entity) will come into force no sooner than on 01 November 2013 (on announcement date) in order to make it possible for enterprises to fulfil all legal requirements to conduct business in the scope of gas trading.    
The draft has been tabled for interdepartmental discussions.
The link to the draft legislation can be found on the website of  Biuletyn Informacji Publicznej Rządowego Centrum Legislacji.

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