Proceedings over Member State failing to fulfil obligations

We represented a client in the pharmaceutical sector in appeal proceedings before the European Commission over infringement by the Polish Excise Duty Act of EU regulations on excise exemption for ethyl alcohol used to manufacture medicines.

The proceedings before the European Commission, initiated in 2013, concerned the Excise Duty Act, the provisions of which do not allow excise exemption for ethyl alcohol imported from third countries outside the excise duty suspension procedure, while the latter can only be applied to intra-Community acquisition and in domestic transactions. The Polish administration’s stance that the said provisions comply with EU law was not upheld by the European Commission, which gave notice of proceedings being initiated under art. 258 of the Treaty on the Functioning of the European Union.

On 6 June 2019, the European Commission issued a reasoned opinion calling on the Republic of Poland to bring domestic practices concerning tax exemption for imported ethyl alcohol used to manufacture medicines into line with EU law.

Current Polish regulations do not provide for excise exemption for ethyl alcohol used to manufacture medicines by refund thereof where excise was paid after payment of customs duty. In the European Commission’s view, this practice is contrary to EU laws on the approximation of the excise duties on alcohol and alcoholic beverages and to the proportionality principle (Council Directive 92/83/EEC).

Poland is now obliged to take measures to modify its provisions within two months; otherwise the Commission may bring the matter before the Court of Justice of the European Union.

It is likely that the proceedings initiated by the European Commission as a result of the appeal filed by DZP may lead to the Excise Duty Act being amended, which in turn could facilitate the import to Poland of raw materials containing ethyl alcohol used to manufacture medicines.

The DZP lawyers who advised the client were Artur Nowak, Partner co-managing the Tax Practice, Jan Czerwiński, Senior Tax Manager, and Paweł Suchocki, Tax Manager, from the Tax Practice.