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Czech Republic to Refund Excise Duty on Unsold Beer Gone Bad

April 29, 2020, 6:14 PM

The Czech Republic parliament passed a bill Wednesday that would refund breweries their excise duties on beer that goes unsold because of the coronavirus pandemic.

The tax administration will judge refund requests case by case, and the beer will have to be either liquidated or reprocessed.

“We are glad that the finance ministry reacted quickly, and that this measure has been approved,” said Martina Ferencova, executive director of the Czech Association of Breweries and Malthouses.

The legislation is now heading to the president for signature.

With annual per-capita consumption in excess of 140 liters, the Czech Republic boasts the highest beer consumption in the world by volume, according to Ferencova, who spoke with Bloomberg Tax during a phone interview on Wednesday.

Sales of draft beer cratered after the Czech Republic closed March 14 bars and restaurants as part of emergency measures to contain the spread of Covid-19.

“Breweries are not only impacted by the drop in sales, but the situation is critical for us also in terms of current stocks of draught beer which we cannot sell,” Tomas Mraz, sales director at Asahi-owned Plzensky Prazdroj, the largest brewing group in the Czech Republic, said in an email.

“Liquidation is difficult and expensive, and if we also had to pay excise duty on unsold, liquidated beer, it would be a significant expense for us,” he said.

Plzensky Prazdroj owns four breweries in the Czech Republic: Pilsner Urquell, Gambrinus, Radegast a Velkopopovicky Kozel. Last year, it sold 7.23 million hectoliters of beer on the Czech market.

Denisa Mylbachrova, spokesperson for Molson Coors-owned Pivovary Staropramen, the republic’s second-largest beer producer, welcomed the vote.

“If we had to pay excise duty on beer after expiration, it would mean an additional financial burden for us at a time when we are losing a substantial part of sales,” she said in an email.

According to Mylbachrova, the company’s beer sales have dropped by about a third in connection with the virus crisis.

The standard rate of excise duty on regular draft beer is 320 Czech koruna ($12.81) per hectoliter, or 100 liters.

The amount of beer to be liquidated will reach “hundreds of thousands of hectoliters,” Ferencova said. “For breweries, it is a huge amount of money.”

The concern is how forthcoming the tax administration will be in granting the refund requests, Fernecova said. “We now need the tax administrators to take a realistic approach and to work with us,” she said.

Check out Bloomberg Tax’s country-by-country roadmaps covering direct and indirect tax developments.

To contact the reporter on this story: Jan Stojaspal in Prague at correspondents@bloomberglaw.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Yuri Nagano at ynagano@bloombergtax.com