On 21 January, the Polish Parliament unanimously adopted an amendment to the Excise Duty Act ("the Act"). The new law provides for exemptions on excise duty for coal products for all energy-intensive plants that undertake to install appropriate environmentally friendly systems and improve their energy efficiency.

Definition of an energy-intensive plant

According to the legal definition in the Act, an energy-intensive plant using coal products is an entity in which the purchase of coal products makes up at least 10 per cent of the value of production sold in the preceding year.

Moreover, an energy-intensive plant using coal products cannot be smaller than a unit of a company construed as a group of tangible and intangible assets, including liabilities, designated for the performance of specific commercial tasks, which are separated in terms of organisation and finance within an existing company, and which could at the same time exist as a company independently performing said tasks.

Energy-intensive plant status also applies to entities commencing new business with the use of carbon or to existing companies running a new carbon installation.

Streamlined legislation

Currently, Polish law offers two separate exemptions from excise duty on coal products. The first is for all energy-intensive plants regardless of any other factors and the second is for plants that have introduced environmentally friendly solutions. Over 300 companies are beneficiaries of this system.

These privileges have been contested by the European Commission, which considers the exemption too broad and imprecisely worded. Therefore the amendment is necessary to avoid formal proceedings being initiated against Poland by the European Commission, which might expose the State Treasury to financial penalties.

After the law changes, the exemption will apply solely to energy-intensive plants that install the required facilities and implement specific environmental and energy-saving policies. Non-energy-intensive plants and plants without environmentally friendly systems will not benefit from such tax advantages.

Competitiveness and the environment

"The amendment will equalise the competitive position of companies operating in Poland with companies from other European Union countries that do not have to bear the costs of the energy excise duty. This will make it possible for them to maintain their businesses and create jobs in Poland," explains the Government Information Centre.

According to governmental experts, the new regulation will motivate plant operators with high levels of energy consumption to conduct more green investments and improve their energy efficiency and use of resources to reduce the negative impact of carbon-intensive industries on the environment.

In addition, the Ministry of Finance estimates that the new law will reduce the number of companies entitled to the tax exemptions by half, thus increasing national tax revenues by approx. PLN 25 million per year.

The Act is set to come into force on 1 July 2017.