Taxes on Alcohol and Alcoholic Beverages

Criteria for determining the status of an establishment producing alcoholic beverages that meets the requirements of "small" and "independent" under Directive 92/83/EEC

Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages allows Member States to provide in their national legislation for reduced rates of tax applicable to alcoholic beverages offered for consumption within their territory, requiring, as a condition for their application, that the alcoholic beverages be manufactured by authorised establishments which meet the requirements to be considered as “small” and “independent”.

The requirements that an alcoholic beverage manufacturer must meet to be considered “small” or “independent” are set out in Articles 4, 9a, 13a, 18a and 22 of Directive 92/83/EEC, and refer to the volume of production and the physical, legal and economic independence of alcoholic beverage producers.

To interpret the requirement regarding the company's production volume, we must understand that:

It applies independently for each category of alcoholic beverage.

It refers to the total annual production of the previous year. In the case of a newly created producer, it refers to the estimated total annual production.

Directive 92/83/EEC requires a production volume limit so that Member States which recognise a reduced rate in their national legislation may require a production volume equal to or lower than that limit.

In the case of wine, the production volume requirement to be met and accredited refers to the average annual production over at least three consecutive wine-growing campaigns.

To interpret the requirement regarding the legal and economic independence of the alcoholic beverage producer, we must understand that:

Two producers of alcoholic beverages are legally and economically independent of each other when one does not exert influence over the commercial decision-making (pricing or purchasing policy, for example) of the other.

Two producers of alcoholic beverages are legally and economically independent from each other when the company to which one belongs does not hold more than 50% of the share capital of the company to which the other belongs.

Two producers of alcoholic beverages are legally and economically independent of each other when the company to which one belongs does not participate in the company to which the other belongs or, if it participates, does not control the majority of the voting rights.

To interpret the requirement regarding the producer's use of facilities physically separate from those of any other producer, we must understand that:

Facilities are understood to be the rooms or areas used by the producer where the technical equipment required for the production of alcoholic beverages is located. Cropland is not considered part of the facilities.

This requirement applies to producers who produce the same type of alcoholic beverage.

This requirement is not applicable to small independent distilleries.

This requirement includes facilities rented by the producer, although ownership is not required.

This requirement is deemed to be met if different producers share the same facilities as long as they do not use them at the same time (for example, one producer who uses the facilities only the first six months of the year and another producer who uses them the following 6 months).

To interpret the requirement that the producer of alcoholic beverages does not produce under a license, we must understand that:

This requirement applies to each category of alcoholic beverage separately.

The production of alcoholic beverages is licensed when it is subject to any form of authorisation which makes the production not completely independent of the third party that has granted the authorisation. This is the case of the authorization granted to exploit a patent, a trademark or a production process that belongs to that third party.

If only a portion of the manufactured beverage is produced under licence, the producer is not entitled to apply the reduced rate to any quantity of the same type of alcoholic beverage.

To interpret the exception that allows two or more small producers to cooperate and be considered as a small independent producer we must understand that:

Cooperating producers may be legally and juridically dependent on each other, but they must be legally and juridically independent from third parties.

Cooperating producers may produce under license from each other, but not from third parties.

Cooperating producers can share the same premises at the same time among themselves, but not with third parties from whom they must be physically separated.