Pursuant to the Excise Duty Act (hereinafter: upa) and Article 2 (1) (1) excise goods are, i.e. energy products and electricity, as defined in Annex 1 to the upa (which lists electricity under CN code 2716 00 00).
Moreover, according to Article 9 (1) point 3,4 and 6 of the upa, in the case of electricity, the subject of excise duty is the consumption of electricity by an entity holding a license, the consumption of electricity by an entity without a license which produced this electricity, as well as the consumption of electricity, as well as the consumption of electricity by the final purchaser, if no excise duty was paid on it in the amount due, and the entity which sold the electricity to the final purchaser cannot be established.
The above list of activities that determine the existence of an activity subject to excise duty also indicates an unlicensed entity that produced the energy. In the case, in accordance with Article 11 (1) point 3 of the upa, the tax obligation arises at the moment of consumption of electricity by an entity which produced the energy. At the same time, Article 16 (1) of the upa indicated the condition for the obligation to register – including i.e. the need to conduct business activity. This provision causes numerous doubts among taxpayers with regard to potential excise duty obligations, which in this article wil be presented in a practical manner resulting from previous experience.
Practical problems for entrepreneurs
First, it should be emphasized that in the case of entrepreneurs generating electricity form photovoltaic panels, there will not always be an obligation to pay excise duty. However, it should be noted that there are several important prerequisites that an entity generating energy is obliged to meet in order to benefit from a possible exemption. It is also worth noting the possible obligations, other than the obligation to pay the tax, resulting from the production of electricity, including the potential registration as an excise entity or keeping records.
When starting the analysis of the practical problems of an entrepreneur, it is worth considering the issue of the subject matter exemption the issue of the subject matter exemption from excise duty, which is provided for in §5 (1) of the Regulation of the Minister of Finance of 28 December 2018 on exemptions from excise duty. Based on this provision, it is possible to apply an exemption from excise duty for the consumption of electricity produced from generators with a total capacity not exceeding 1 MW by an entity that consumed this energy. However, the exemption referred to above may be applied on condition that excise duty has been paid on these energy products in the amount due.
Regarding to the issue of formal obligations, it should be noted that the upa provides for exceptions form the obligation to submit a registration notice in the case of electricity. For example, Article 16 (7a) of the upa indicated that there is no obligation to make registration declaration for entities producing electricity from generators of a total capacity not exceeding 1 MW, which is not supplied to interconnected and cooperating installations used for the transmission of this energy, but is consumed by this entity, provided that the appropriate amount of excise duty was paid on the energy products used to produce this electricity.
In accordance with the above, in order for an entity that actually produces energy and consumes it from generators with a total capacity not exceeding 1 MW not to be required to submit a registration declaration, it is necessary that this energy is primarily consumed only by the entity that produces it. In addition, such energy may not be sold or supplied to interconnected and cooperating installations for the transmission of that energy and, importantly, excise duty should be paid on it.
One cannot do not mention at the same time the possibility of exemption from tax under Article 30 (1) of the upa, where the exemption of electricity coming from renewable energy sources may occur through a reduction of excise duty payable on electricity for the nearest billing periods, but importantly – not earlier than upon receipt of confirmation of redemption of the certificate of origin of energy. This means that only upon receipt of the document confirming the redemption of the certificate by the taxpayer is it possible to fulfil the condition entitling to excise duty exemption under Article 30 (1) of the upa. For example, in the judgement of 21 October 2020 (act No I SA/Gd 376/20) it was stated that:”(…) to calculate the amount of the exemption it is necessary to apply (…) – the excise rate applicable to electricity settler in the declaration for the period in which the applicant company received the document confirming the redemption of certificates of origin, because then its right to benefit from the relief is finally formed”.
Obligations of the taxpayer
Pursuant to Article 24 (1) point 3 of the upa, in the case of electricity, the taxpayer is required, without being appealed by a tax authority, to submit to the component head of the tax office tax declarations in accordance with a prescribed form, and to calculate and pay excise duty by the 25 day of the month following the month in which the electricity was consumed. It should be borne in mind that even through an entrepreneur may potentially be exempted from the payment of tax or registration for excise duty, as a rule the obligation to submit monthly declaration arises.
It should be additionally be mentioned that at the same time, according to Article 138h (1) point 2 of the upa, an entity consuming electricity is, as a rule, obliged to keep quantitative records of electricity. However, in order for there to be no such obligation, it is necessary for the energy to be consumed solely by the entity producing it, and also for there to be no activity of supplying it to interconnected or cooperating installations.
The above was confirmed in the tax ruling of 12 January 2021 (0111-KDIB3-3.4013.238.2020.1.MK), where the tax authority, referring to the prosumer’s situation (but to the extent that we can refer to the entrepreneur), indicated that: “(…) the applicant is a prosumer generating electricity in a micro-installation. This means that the electricity generated is supplied to interconnected and cooperating installations for the transmission of this energy (a micro-installation is an installation of renewable source which is connected to the power grid). There is also no doubt that the applicant is run a business and will carry out activities subject to excise duty (…) The applicant is required to submit declarations referred to in Article 24 of the Act and to keep the quantitative register of electricity pursuant to Article 138h. The above is not altered by the fact that the applicant refers to Article 30 (6) of the Act or to §5 (1) of the Regulation on Exemptions”.
Thus, an entity conducting business activity and at the same time producing electricity from photovoltaic panels even for its own needs, must absolutely remember about the obligation to submit excise tax declarations. The relevant template is indicated in the Ordinance of the Minister of Finance of 24 January 2018 on template of tax declarations for excise tax, indicating that the appropriate document for the present case will be form AKC-4 with annex AKC-4/H.
It is necessary to emphasize the importance of the consequences of failing to comply with any excise duty obligations, which carries serious consequences. Omission of such actions as failure to submit the registration duty (when it is required) or failure to keep records (when it necessary) may be considered by the authority as a fiscal offence. Therefore, when undertaking activities that may potentially generate excise duty obligations (as in the case in certain instances of photovoltaic electricity production by entrepreneurs), one should first familiarize oneself with the obligatory formal and tax obligations. Their implementation may prove to be quite difficult in practice. As of July 2021, all excise declarations can only be filled electrically. This is also how the registration process takes place. Taking into account the fact that only some functionalities are available on the PUESC2 platform, and some still on the earlier version of PUESC, in practice, not only the identification of obligations, but also their execution, proves to be quite troublesome for entrepreneurs. Further questions also arise – since declaration are to be submitted only in electronic form from July, will there in fact be no obligation to register in the Central Register of Excise Undertakings in accordance with the regulations in relation to persons exempt from excise duty?
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