In January 2021, an amendment to the Act on Upbringing in Sobriety and Counteracting Alcoholism came into force, introducing a levy on small bottles of alcohol (Polish: ‘małpka’ – ‘little monkey’). This provision, although controversial, is reflected in rising budget revenues, which in the first half of 2024 brought in as much as PLN 339 million, more than PLN 102 million more than in the first six months of last year.
As we approach the fourth anniversary of the introduction of this levy, it is a good time to take stock of its impact and the doubts surrounding its application. Today, we can see that the revenue from the levy bears no relation to the ever-decreasing sales volumes. This points to a systemic problem.
Disputes over the interpretation of the ‘małpka’ levy
The increase in budget revenue is the result of a higher number of inspections carried out by the tax authorities to check that companies are using the correct settlement patterns. As a result, the number of disputes between taxpayers and the tax authorities due to ambiguities in the interpretation of the legislation has also increased in recent months.
Interpretation by the National Revenue Administration Information Centre and a landmark judgment by the Supreme Administrative Court in a ‘małpka’ levy case
The case concerned a businessman who was involved in both the wholesale and retail sale of alcoholic beverages and was unable to clearly determine which alcoholic beverages would be resold to purchasers with a retail licence and which would be resold directly to consumers. He asked the Director of the National Tax Administration Information Centre (KIS) the following question:
Where a supplier supplies alcoholic beverages to a trader who holds both a wholesale licence and a retail licence, is the supplier required to pay an alcoholic beverages levy on all alcoholic beverages supplied to the trader, whereas the trader is not required to pay the levy in the event of resale to purchasers, regardless of whether the supplier has paid its levy correctly, which the trader cannot verify in any event?
The Director of the KIS stated that the trader would be obliged to pay the ‘monkey’ levy. This reasoning was upheld by the Provincial Administrative Court (WSA), and the company then appealed the judgment with the case being finally heard by the Supreme Administrative Court (Case No. III FSK 249/22).
The ‘małpka’ levy – the position of the Supreme Administrative Court
The Supreme Administrative Court (NSA) sided with the trader, citing the constitutional principle that doubts should be resolved in favour of the taxpayer. In its statement of reasons, the NSA highlighted:
- The ambiguity in the legislation, which could lead to a situation of double taxation
- The lack of legal mechanisms enabling traders to verify whether the supplier has paid the levy
- The need to obtain information that is a business secret from counterparties, which imposes additional burdens on businesses
The inability to verify whether the supplier has paid the levy
The Court found it unacceptable that the burden of vague regulations and the lack of adequate state supervision should be placed on entrepreneurs, especially when they are making efforts to act in accordance with the law. The judgment of the Supreme Administrative Court points to the urgent need to regulate the issue of the ‘małpka’ levy and reveals the inadequacy of the current legislation in this area.
The implications for industry
While the NSA ruling is important, it is only part of the broader picture of tax disputes surrounding this levy. The poor quality of the legislation, combined with the pressure to increase budget revenues, may lead to an increase in the number of inspections by the tax authorities. In such a situation, it is advisable to:
- Carry out a detailed review of the rules for settling the levy
- Prepare for possible inspections
- Minimise the risk of documentation errors
Our clients’ experience has shown that even leading companies in the spirits market have often settled this levy incorrectly, resulting in lengthy tax disputes. Irregularities have also included the ‘małpka’ levy being paid twice or even three times in a supply chain.
Four years of the ‘małpka’ levy – a drop in revenue, inspections by the authorities and the most common settlement errors
The alcohol industry faces a major challenge in interpreting the ‘małpka’ levy regulations correctly. While the NSA ruling may set an important precedent for similar cases, it does not resolve all doubts about interpretation and traders are left still facing a number of unresolved practical problems.
As the number of tax inspections increases, it will be important to develop consistent industry practices and keep adequate documentation. We therefore keep abreast of case law and tax rulings that may affect the way in which the ‘małpka’ levy is settled.
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