On 1 January 2025, a new scheme, consisting in collecting deposit when selling products in beverage packaging, such as single-use plastic bottles up to 3 litres, metal cans up to 1 litre and reusable glass bottles up to 1.5 litres, commonly referred to as the deposit-refund system, will begin to operate.
Deposit-refund system – general information
The deposit-refund system has been formally put in place by the Act published in October 2023. However, in view of the doubts raised, works to amend the act began in 2024. As a result, a new bill (the bill amending the Act on Packaging and Packaging Waste and certain other acts - List No. UD45; hereinafter: “Bill” or “Amending Bill”) was published in early August 2024 to put the system into its final shape.
According to the new rules, a fee is collected on all beverages sold in packaging covered by the deposit-refund system. The deposit will be available for collection when the packaging or packaging waste is returned, and no receipt will be required to retrieve it.
Retail and wholesale outlets over 200 m2 offering beverages in packaging covered by the deposit-refund system will be obliged to collect and return the deposit, as well as to accept the packaging and packaging waste returned.
Smaller shops will be subject to the same obligation in terms of reusable glass bottles up to 1.5 litres, provided that they offer beverages in such packaging, but in terms of other kinds of packaging covered by the system, they will only need to collect the deposit. Such outlets can voluntarily join the system to return deposits and collect empty packaging of other eligible kinds.
Under the Amending Bill, the deposit is to follow the packaging. In other words, it is to be charged upon every sale of the product covered by the deposit-refund system through the entire distribution chain.
Settling VAT on deposits – current practice
The existing regulations of the VAT Act already contain provisions on the deposit collected when a taxpayer has delivered goods in returnable packaging, stipulating that such deposits are not included in the tax base. However, if a customer fails to return the packaging, the taxable amount should be increased by the value of said packaging on the 60th day following the day on which the packaging was given, if the agreement does not specify the time limit for returning said packaging and, if the time limit is specified in the agreement, on the day following the day on which the agreement stipulated the packaging be returned.
Please note that the provisions quoted above will not apply to the deposits collected under the new deposit-refund system. Instead, such deposits will be covered by new rules provided for by the legislator.
The existing rules will continue to operate and will still apply to returnable packaging outside the new system (including reusable packaging used in transport, such as pallets, plastic distribution containers, box pallets, etc.).
New rules of settling VAT
Pursuant to the Bill, new rules of settling VAT will apply to both reusable and single-use packaging covered by the deposit-refund system.
The deposit collected will not be included in the tax base. This means that the deposit collected at each stage of trading in the supply chain will not be covered by VAT.
Simultaneously, at the end of every calendar year, entities introducing products in beverage packaging (including manufacturers and importers), will have to declare VAT on the deposits for packaging covered by the deposit-refund system that have not been returned in the given year.
If there is an excess in the amount of packaging (packaging waste), the entity introducing the product will be able to carry-over that excess to the settlement for the subsequent year.
Representative entity (operator) acting as a VAT remitter
Deposit-refund systems will be handled by representative entities (operators), the task of whom will be, among others, settling deposits with retail and wholesale shops, as well as other outlets collecting packaging and packaging waste.
Pursuant to the Bill, operators shall also act as remitters of VAT on unreturned deposits. Such entities will be obliged to collect and pay to fiscal authorities VAT on deposits collected by entities introducing products in beverage packaging, with whom they entered into contracts, that have not been returned within the frames of the system.
At the same time, VAT settlement itself on the unreturned deposits will be done by taxpayers (i.e., entities introducing products in beverage packaging) via VAT returns and records.
Supplementary records for VAT settlements
Both entities introducing products in beverage packaging and operators will be required to keep detailed records for VAT settlements.
The records are to be made available online on every request by tax authorities, to enable them to verify the correctness of VAT settlements of the remaining deposits.
How can we assist you?
The introduction of the deposit-refund system will have a significant impact on many entities, including those introducing beverages in packaging covered by the new regulations (including manufacturers, and importers). This is because the system comes with supplementary tax and reporting obligations. The changes will also affect distributors, commercial units, and consumers as well.
At KPMG, we are aware of the complexity of the regulations being introduced, affecting many market participants and bringing potential risks.
Due to the complexity of the new regulations, we encourage you to contact us. We provide support in preparing for introduction of the deposit-refund system, analyse the potential impact of new regulations on VAT settlements, and assist our clients in ensuring compliance with the new tax and reporting regulations.
