Excise duty on alcohol used in biocidal products – judgment and implications for the industry

The Voivodship Administrative Court in Gliwice, in a non-final judgment (ref. III SA/Gl 895/24), upheld the position of the tax authorities and ruled that disinfectant liquid is subject to excise duty.

Why is excise duty on biocidal alcohol controversial?

Recently, excise duty on alcohol used in biocidal products has become a subject of dispute between businesses and the tax authorities. The biocidal products industry argues that ethyl alcohol used for industrial and disinfectant purposes should not be taxed in the same way as alcohol intended for human consumption. The tax authorities, however, adopt a restrictive approach, maintaining that mere dilution of alcohol does not create a new product.

This issue is particularly significant in light of the growing importance of biocidal products in health and environmental protection. Excise duty on such products can directly impact production costs and the availability of disinfectants on the market.

Legal basis for excise exemption in production

Excise exemption for ethyl alcohol is available only where the alcohol is used to produce another product not intended for human consumption. The condition is that a new product must be created which no longer retains the essential character of alcohol. The legislator introduced this solution to support the development of the chemical, cosmetics and pharmaceutical industries.

Facts of the case

The dispute concerned whether a disinfectant for hands and surfaces – essentially denatured ethyl alcohol with 5% demineralised water – should qualify for excise exemption.

The company treated its product as biocidal and therefore exempt from excise duty, arguing that the alcohol had been used to manufacture a product not intended for consumption. The tax authorities disagreed, concluding that the final liquid was not a new product but merely diluted denatured alcohol, still classified under CN code 2207.

Judgment of the Voivodship Administrative Court in Gliwice – key findings

The Court sided with the tax authorities. According to the Court, for the exemption to apply, denatured alcohol must actually be used to produce a new product not intended for human consumption. Simply adding 5% demineralised water does not, in the Court’s view, result in a new product, as the essential character remains that of alcohol, which continues to fall under CN 2207.

The Court emphasised that the purpose of the excise exemption is to ensure tax-neutral use of alcohol as a raw material in the creation of other, non-excise products (e.g. cosmetics, solvents). In this case, however, the final product essentially remained denatured alcohol.

Key takeaways from the judgment on excise duty and biocidal products

The judgment highlights how restrictively courts and tax authorities interpret excise exemptions:

• New product – the exemption applies only where a technological process results in a product different from denatured alcohol, ideally classified under a separate CN code.
• Production process – mere dilution or simple mixing of alcohol is insufficient to be considered “use” under the Act.
• Production planning – businesses should design processes and maintain documentation so that there is no doubt alcohol has been incorporated into another product rather than simply diluted.
• Interpretation risk – even a favourable individual ruling may not protect the taxpayer if the actual process is deemed insufficient to meet exemption criteria.

Potential impact on the biocidal industry

For the chemical and biocidal sectors, this judgment – though not final – sends a strong signal that the tax authorities will scrutinise whether the final product genuinely differs from denatured alcohol. Any doubt may lead to denial of excise exemption.

Recommendations for producers and importers of biocidal alcohol

• Carefully analyse technological processes to ensure a genuinely new product is created.
• Maintain detailed excise records documenting the use of alcohol.
• Consider applying for individual tax rulings.
• Closely monitor court judgments and administrative practice on excise classification of ethyl alcohol (CN 2207).

Excise duty and sustainable production

Biocidal products are crucial for public health but also matter in the environmental context. Excise rules on biocidal alcohol may affect the development of environmentally friendly technologies – e.g. innovative denaturing methods or lower-carbon substances.

High excise duty on ethyl alcohol used in disinfectants may discourage investment in green alternatives. Striking a balance between the state’s fiscal interest and the sector’s needs in health and environmental protection is therefore essential.

Summary – what next after the Gliwice judgment?

The Gliwice judgment serves as a warning to the chemical and biocidal sectors. The tax authorities will examine production processes and CN classifications in detail, treating dilution as insufficient for exemption. Businesses must review processes and documentation and prepare for possible audits.