Taxation and Customs Union

Denatured Alcohol Not For Human Consumption

Alcohol can be made non-suitable for human consumption by adding very bad tasting and/or smelling products and (preferably) a chemical marker. 

This process of making alcohol unsuitable for human consumption is called (complete or partial) denaturing of the alcohol.

When it has been denatured according to the EU rules, the alcohol can be exempted from excise duties.

This includes, for example, alcohol used for industrial purposes, to produce foodstuffs and medicines, or to manufacture cosmetics, biofuels, paints, anti-freeze and cleaning products.

Specific rules apply to the categories of alcohol, which are exempt from excise duties, in order to prevent fraud and protect consumers from the serious health risks of drinking illegal alcoholic drinks.

 

Legislation

Directive 92/83/EEC (Article 27) states that, in order to benefit from the excise duty exemption, alcohol not intended for human consumption must be denatured in accordance to required methods laid down at national level.

This legislation then distinguishes between:

  • Completely denatured alcohol (CDA) - Article 27 (1) (a): This is predominantly alcohol, which is for industrial use. There is a new "Euro" formulation used by the majority of Member States for completely denatured alcohol (CDA) of:

Per HL of absolute alcohol

  • 1L methyl ethyl ketone (a smelling agent)
  • 1L isopropyl alcohol (a chemical analytical marker)
  • 1gr denatonium benzoate (a tasting agent)

In a few Member States, there are varying combinations of the quantities of two of the three chemical agents, but all three chemical agents are present in all of the Member States "Euro" formulations for CDA.

There is also a significant reduction in the number of national CDA formulations in use. Member States can still maintain their own national denaturing formulations for CDA, which must then be notified and authorised at EU level. Completely denatured alcohol must have a simplified accompanying document (SAD) when moving within the EU (Commission Regulation (EEC) 3649/92).

  • Partially denatured alcohol (PDA) – Article 27 (1) (b): Member States authorise national processes for "partial denaturation". These processes are used to denature alcohol in products not intended for human consumption but for which the rules on completely denatured alcohol are not suitable. Examples of such products include cosmetics, perfumes, hygiene products, bio-fuels, screen wash, anti-freeze, inks, cleaning materials etc. A finished product containing partially denatured, which is manufactured in one Member State, in line with EU provisions, may circulate freely in the Single Market, without the need for accompanying documents.

Directive 2008/118/EC (Article 15 (2)) states that production, processing and holding of excise goods, where the excise duty has not been paid, must take place in a tax warehouse. It follows then that the denaturing process must take place in a tax warehouse. This is to ensure proper oversight of the denaturing process and prevent alcohol on which excise duty has not been paid from being released into circulation and illegally sold for consumption.

 

Mutual recognition of denaturation processes

Commission Regulation (EC) 3199/93, as most recently modified (published in the OJ on 6th December 2017) by Commission Implementing Regulation (EU) 2017/2236, provides for the mutual recognition of Member States' procedures for the complete denaturation of alcohol.

This also includes a series of "Euro" denaturing formulations for completely denatured alcohol.

This ensures that alcohol which has been completely denatured in one Member State, according to any of the "Euro" formulations or approved national procedures, is recognised as completely denatured alcohol when it is moved to another Member State. As such, it remains exempt from excise duties, regardless of where it is transported within the EU.

The accompanying annex lists the "Euro" denaturing formulations for CDA and the national CDA denaturing methods still in use in a limited number of Member States.

 

Review of provisions for excise-exempt alcohol

The Commission launched a fundamental review of the provisions for denatured alcohol in the EU in 2008, following extensive consultation with Member States and industry. The aim of this review was to address problems in the current system, notably preventing fraud and reducing administrative burdens caused by too many national denaturing processes. The Commission's Anti-Fraud Action Plan in 2012 also included a project to harmonise alcohol denaturation. This recognised that a more coherent approach was needed to prevent excise evasion and protect human health.

The project has concluded its work on completely denatured alcohol. This has recently resulted in the approval of a new "Euro" denaturing formulation, which will be used in the majority of the Member States, and the removal of most of the national CDA formulations.

A Standard Operating Procedure (SOP) for all customs laboratories across the EU has also been implemented for the "Euro" denaturing formulations for CDA. This allows the customs laboratories to test for illicit alcohol made from the "Euro" denaturing CDA formulations in exactly the same way, providing better legal certainty, and more efficient testing standards across the EU.

Training was also provided for the customs laboratories in the Member States on the application of the methods used.

Recommendations and opinions on denaturing of ethyl alcohol used to manufacture cosmetics and perfume were adopted or discussed by the Indirect Taxation Expert Group on 31 October 2014.

A questions and answers sheet on procedures for the denaturing of alcohol in the manufacture of cosmetics and perfumes was also published.

 

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