Severance payment distillery

Still for discontinuous firing after registration

Severance payment distillery is the name for a production company for spirits ( distillery ) whose distillers are not under customs lockdown during the production process . In contrast to the closure distillery , the severance payment distillery does not pay the tax based on the amount of alcohol actually produced, but based on the type and amount of the registered material. A special case of the severance burn is the fabric owner burn.

History (Germany)

Compensation burning has existed in Germany since 1887 as a southern German special law. Most of these distilleries were on the Upper Rhine and Lake Constance. The name severance payment comes from the possibility of choosing between a “severance payment for a certain tax amount” and a “compensation for the minimum amount”. The word severance pay in this context is to be understood as a service to compensate legal claims. Initially, the severance payment distilleries had a right to distill 300 liters of alcohol per year. Since the 1920s, severance distilleries could only be licensed with an annual production of 50 liters of alcohol. However, the 300 liter distilleries continued to exist and could also be passed on to other owners. This led to the fact that in 2017 the overwhelming number of distilleries were still licensed as 300 liter distilleries according to the “old law”. The total number of distilleries was capped over the "limit number" to the maximum stock of the twenties. When registering for severance pay, the distiller could choose whether he wanted to pay tax on the alcohol or deliver it to the federal monopoly administration for spirits in return for a takeover fee.

As a result of the abolition of the spirits monopoly initiated by the European Union , the severance payment distilleries were also placed on a new basis in 2018. Since then, they have been licensed nationwide as 300-liter distilleries, the requirements for a license are standardized, delivery to the federal monopoly administration has been abolished and alcohol production has been introduced as an option under tax suspension.

Statutory Regulations (Germany)

§ 1 Alcohol Tax Act - Tax Object
The tax object alcohol products is defined.

§ 2 Alcohol Tax Act - Tax rate
The tax on severance payment is € 10.22 / l alcohol. This tax reduction only applies if the distillery is legally and economically independent from other distilleries.

§ 4 Alcohol Tax Act - Tax warehouse
Alcohol products may only be produced in the tax warehouse. Compensation burning is an exception. Production or extraction means that this tax item is newly generated. Purification means that the alcohol is distilled again without creating a previously non-existent tax item (fine distillation; e.g. spirit production).

Section 9 of the Alcohol Tax Act - Compensation
Distillery Compensation distilleries are places where alcohol products without closures can only be obtained from certain substances and cleaned. The annual production in a severance payment distillery must not exceed 300 liters of alcohol per calendar year. The result of the firing is determined according to the official yield. Bringing the product to other EU member states and exporting it to third countries is prohibited.

§ 10 Alcohol Tax Law - Permission
The severance payment burner requires an official permit. The economic need is named as an essential requirement for a permit to be granted. The individual fires must be registered using a severance payment notification.

§ 11 Alcohol Tax Act - Fabric
owners Fabric owners are natural persons who are allowed to produce up to 50 liters of alcohol from self-made fruit at an external distillery. This quota of fabric owners does not affect the burner's 300 liter quota. Fabric owners do not need any further economic need or formal permission. The provisions on the yield and the severance payment notification also apply to them.

§ 12 Alcohol Tax Act - Section
Burning Within a 3-year section, severance pay burners may produce 900 liters of alcohol products (free distribution of the annual 300-liter quota over three years). Fabric owners are entitled to 150 liters during this period. The current section began on January 1, 2018 and ends on December 31, 2020.

§ 19 Alcohol Tax Ordinance - Permit Procedure
The permit must be applied for formally (form 1248). The economic need (§ 10 Alcohol Tax Act) is given if the applicant can provide evidence of 3 hectares of agricultural land or 1.5 hectares of intensive fruit including viticulture.

§ 21 Alcohol Tax Ordinance - Economic Need
The economic need according to § 19 Alcohol Tax Ordinance is reduced to 0.75 hectares of agricultural land or 0.375 hectares of intensive fruit for ongoing operations. This means that the severance payment burner only needs the 3-hectare minimum area at the time of the application.

Section 23 Alcohol Tax Ordinance - Severance
Payment Notification Fires must be registered via a severance payment notification (Section 10 Alcohol Tax Act).

§ 24 Alcohol Tax Ordinance - Yield
The term yield (§ 9 Alcohol Tax Act) is explained in more detail. The current official raw material list with the official yield rates is published on the website of the German customs administration.

Section 26 Alcohol Tax Ordinance - Simplified Wage Distilling The
simplified wage distilling is a kind of quota leasing. Compensation burners can, under certain conditions, burn the contingent of third-party distilleries at their own distillery. This is limited to 540 liters of alcohol per year; in practice, this means that severance burners can nominally produce up to 840 liters of alcohol products per year, or 2,520 liters per section. The application must be submitted using form 1250.

Section 43 Alcohol Tax Ordinance - Tax Suspension
Under certain circumstances, it is possible to win severance alcohol under tax suspension.

Special features (Germany)

yield

Example calculation: The yield rate for apple mash is 3.6%. If the distiller registers 200 liters of apple mash, then he receives a tax assessment for 200 * 3.6% = 7.2 liters of alcohol. Excessive yields, also known as overburn, pass into the possession of the burner tax-free. Lower yields are at the expense of the burner. However, they almost never occur, on average the excess yield is 40%. The average tax rate on the 10.1 liters (7.2 liters nominal + 2.9 liters overburn) generated in this example with 40% excess yield thus drops from 10.22 € / l to about 7.30 € / l ( 7.2 l * 10.22 € / 10.1 l).

Severance payment registration

The burner registers his raw materials with a severance declaration at the main customs office in Stuttgart. He decides whether the nominal alcohol products are to be taxed or obtained under tax suspension. A copy of this permit is sent to the local main customs office for monitoring. Form 1220 is to be used for fruit materials (non-floury substances), for raw materials containing starch, form 1219 (floury substances). Fabric owner fires must be reported using form 1221.

Tax suspension

In principle, severance alcohol is released for tax purposes when it is produced. This means that the levies are due when they are generated. If the burner (or substance owner) ticks "Tax suspension" on the severance payment notification, the tax does not arise. All alcohol, including overburn, must then be transferred to a tax warehouse by the end of the month after next. There it is treated like standard alcohol and must be taxed at the rate of 13.03 € / l when it is removed from storage (also including overburn). Since the deferred payment of the tax suspension does not outweigh the tax, which has almost doubled all in all, this procedure is of no interest to most burners, with one caveat. The restriction concerns the bringing of severance alcohol to other EU member states and its export to third countries . In principle, this is prohibited according to Section 9 of the Alcohol Tax Act. It becomes possible via the intermediate step “tax suspension”. Since no tax is incurred in these proceedings in Germany, this option is attractive.

Association and trade journal (Germany)

In Germany, many severance burners are represented in the Federal Association of German Small and Fruit Distillers. Alois Gerig is the federal chairman of this association . The trade journal “Kleinbrennerei” is published monthly by Eugen-Ulmer-Verlag, Stuttgart.

Austria

The following basic rules apply to severance payments in Austria:

only raw materials obtained by the user may be processed (Section 55 of the Alcohol Tax Act);
only a simple furnace may be used (§§ 55, 61 Alcohol Tax Act);
the annual production is 100 liters; it may be exceeded by a further 100 l (Section 65 of the Alcohol Tax Act);
the alcohol tax is 6.48 € / l within the production volume. For the other 100 liters it is 10.80 € / l (§§ 2, 65 Alcohol Tax Act);
under certain circumstances, the alcohol is tax-free as house alcohol (§ 70 Alcohol Tax Act);
Fires are to be registered via a severance payment notification (§§ 10, 62 - 64 Alcohol Tax Act);
there are old cases with a higher production volume and without other restrictions (§ 111 Alcohol Tax Act).