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Friday, 29 March 2019

“Two beers or not two beers, that’s the question” - The definition of “beer” and its taxable basis for excise duties

Two recent judgments of the Court of Justice of the European Union are of particular importance for the European beer sector. These judgments do not only result in certain beers being taxed less in the future. They may also grant a right to the reimbursement of excise duties that are not legally owed, and the interest thereon.

Case B.S.i

In this case, the Court of Justice of the European Union ruled on the question whether a product with an actual alcoholic strength by volume exceeding 0.5% vol. that is the result of a mixture of an alcoholic intermediate product, obtained by fermentation, non-alcoholic beverages, should be regarded as "beer" or as a "fermented alcohol-based beverage".

For a proper understanding, it should be noted that "beer" includes any product of heading 2203 of the Combined Nomenclature ("beer made from malt") as well as any product of heading 2206 of the Combined Nomenclature containing a mixture of beer with non-alcoholic drinks, in both cases with an actual alcoholic strength by volume of more than 0.5% vol.

The alcoholic intermediate product was produced using a wort containing less malt ingredients than non-malt ingredients. Glucose syrup was added prior to the fermentation process.

The Court ruled that this intermediate product could be classified as beer made from malt.

To that end, the Court first stated that beer cannot be produced without malt being used as an ingredient. However no minimum percentage of malt is required in the wort. Furthermore, the Court ruled that the presence of glucose syrup in the wort is not prohibited.

The Court therefore concluded that a product manufactured with a small proportion of malt and the addition of glucose before the alcohol fermentation is not precluded from the concept of beer made from malt. However, in order to be classified as beer made from malt, the organoleptic characteristics of the product must correspond to those of beer.

This is the case if the product visually resembles beer and has its specific taste.

In other words, an intermediate product intended to be mixed with non-alcoholic beverages, obtained from a wort containing less malt ingredients than non-malt ingredients and to which glucose syrup is added prior to the fermentation process, can be regarded as beer, provided that this product visually resembles beer and has its specific taste.

The mixture consisting of beer made from malt and non-alcoholic beverages, with an actual alcoholic strength by volume of more than 0.5% vol., must in that case also be regarded as "beer" and not as a "fermented alcohol-based beverage".

The judgment of the Court is certainly of importance. After all, the referring court found that Member States classify mixtures in different ways when the malt ingredients do not predominate.

Some Member States classify such beverages as "beer", others as "fermented beverages other than beer". The latter are subject to a higher excise duty-rate. The qualification as the lower taxed "beer" is now established.

Case Kompania Piwowarskaii

In this case the Court ruled on the basis of assessment for flavoured beers. The beverage in question was a traditional beer to which sugar syrup, aromatic substances and water were added after completion of the alcoholic fermentation process.

These kinds of drinks are taxed with excise duties on the basis of the number of hectoliters per degrees Plato.

The Plato scale enables the calculation of the percentage of dry extract in the mass of the original wort, one degree Plato being equivalent to 1 g of dry extract per 100 g of original wort.

When additives such as sugar syrup and aromatic substances are added to a traditional beer after the fermentation process is completed, the question arises whether these additives should be taken into account when calculating the degrees Plato.

According to the Court of Justice this is not the case. When calculating the degrees Plato, the ingredients added after the fermentation process should not be taken into account.

The Court of Justice ruled that in the usual meaning in brewing, a degree Plato corresponds to 1 gram of dry extract per 100 g of original wort. The concept of “original wort” designates, up to the moment when the fermentation process begins, the mixture of water and other ingredients of the beer prepared for fermentation, such as barley malt and hops. The dry extract of this original wort consists of all of the ingredients of the original wort other than water.

In other words, the Court decided that the degrees Plato must be calculated on the basis of an extract of the original wort before starting the fermentation process and therefore without having to take into account the ingredients that are added after the fermentation process is completed.

This judgment affects the daily practice. After all, Member States calculate the degrees Plato generally on the basis of the dry extract of the end product and thus include in the calculation the ingredients that are added after the fermentation process. Such a calculation clearly not complies with the case law of the Court of Justice.

Conclusion

In accordance with the case law of the Court of Justice less excise duties will be due upon release for consumption of mixtures of an alcoholic intermediate product obtained by fermentation (with the organoleptic characteristics of beer) and non-alcoholic drinks, where this mixture has an actual alcoholic strength by volume of more than 0.5% vol. Also a lower excise duty rate will apply when flavored beers are released for consumption.

Companies which have paid excise duties that were not legally owed, taken into account these judgments of the Court of Justice, are entitled to the reimbursement of these excise duties as well as to the payment of the corresponding interest, which runs from the date of payment of the excise duties.

 

Ward Lietaert - Associate (ward.lietaert@tiberghien.com)
Jurgen Gevers - Counsel (jurgen.gevers@tiberghien.com


 i CJEU 13 March 2019, case C-195/18, B.S., ECLI:EU:C:2019:197.

ii CJEU 17 May 2018, zaak C-30/17, Kompania Piwowarska, ECLI:EU:C:2018:325.

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