Q&A: Poland’s deposit-refund scheme | In Principle

Poland is relatively late in establishing a deposit-refund system for beverage containers. After many years of pronouncements by politicians, the act did not enter into force until 13 October 2023. Functioning of the scheme is set to launch on 1 January 2025, leaving little time for businesses to prepare. But questions remain whether the system will start working as the parliament expected on the designated date.

Why do we need a deposit-refund scheme?

Adoption of a deposit-refund scheme should not surprise anyone, as it was much-needed. In Poland, there has been talk of introducing it for years. And the experience from other EU member states proves its effectiveness. The key impetus for introduction of the deposit-refund scheme in Poland was enactment of the Single-Use Plastics (SUP) Directive (2019/904). It obliges the member states to ensure separate collection of packaging waste generated from single-use plastic beverage bottles up to 3 litres, along with their plastic caps and lids, at 77% by 2025 and 90% by 2029. Such requirements could not be met under Poland’s existing legal conditions. Therefore, the deposit-refund scheme is intended to close the loop for some packaging waste. It is a crucial step in Poland’s transition to a circular economy.

Indeed, when designing the deposit-refund scheme, the Polish parliament went beyond the requirements of the SUP Directive. The deposit-refund scheme covers not only single-use plastic beverage bottles with a capacity up to 3 litres, but also reusable glass bottles of up to 1.5 litres and metal cans up to 1 litre. In principle, expansion of the deposit-refund scheme should be evaluated positively. (We addressed the shape of the scheme in the article “A deposit-refund scheme is on the way.”)

Who is covered by the deposit-refund scheme, and under what conditions?

The essence of the deposit-refund scheme is simple. A consumer purchases a product (beverage) in packaging, with a deposit on the packaging included in the price of the product. The amount of the deposit is refunded to the purchaser when the purchaser decides to return the empty packaging (in the case of reusable packaging) or packaging waste (in principle, in the case of single-use packaging).

The consumer will not have to show a receipt to obtain a refund of the deposit. Any objection by the business purporting to require presentation of a receipt as a condition for return of the deposit will be ineffective, as stated in Art. 40g(1)(4) of the Packaging and Packaging Waste Management Act. It will also be unacceptable to “refund” the deposit in the form of a voucher for subsequent purchases, as previously practised by some businesses. The deposit must always be returned in cash.

But at the moment it is not entirely clear how the deposit will be refunded. Among other things, it may include a direct refund through a “bottle machine,” or a refund by the vendor. In practice, the rules for reimbursement will be determined by “representative entities” applying for a licence to operate a deposit-refund scheme on behalf of numerous small retailers.

The stores participating in the packaging and packaging waste collection and deposit-refund scheme will not be allowed to set a limit on the amount of packaging accepted at one time. Thus operators of small stores should carefully consider whether they can accept and properly store the packaging and packaging waste covered by the deposit-refund scheme that will be returned by end users.

Businesses will have to bear in mind that the deposit will also have to be refunded for “reusable packaging” that has already become “packaging waste” after sale. In other words, stores participating in the deposit-refund scheme will also have to accept broken bottles and refund the deposit on them. This means that stores accepting packaging and packaging waste must prepare the appropriate infrastructure to store broken glass as well.

If the purchaser does not return the packaging or packaging waste, they will not receive a refund of the deposit. Pursuant to Art. 40i(4) of the act, funds from unclaimed deposits and from the sale of materials from packaging waste processing will be used to finance the deposit-refund scheme. Therefore, unrefunded deposits will go to the introducers of packaged beverages, rather than being retained by the retailer as additional revenue.

However, the provisions as they stand do not cover a sizable group of beverage containers, mainly disposable bottles for wine and spirits. This makes little sense, especially since the Polish scheme generally exceeds the requirements of the SUP Directive.

But for disposable glass packaging not covered by the deposit-refund system, entities placing such products on the market will be required to ensure that packaging waste of the same type as that generated from the packaging in which they placed products on the market will be recycled, as stated in Art. 17(1) of the act. This obligation is primarily enforced by a product fee, which the business will be forced to pay if it does not achieve the required levels of recovery and recycling. These duties will be carried out exclusively outside the deposit-refund scheme.

In the context of refunds, there is another crucial detail. Under the act, the cost of refunds will be borne only by certain entities, particularly the largest stores, which lawmakers assume will be able to set aside space to store returned packaging and packaging waste.

But the obligation to collect deposits may also apply to less-obvious entities. For example, wholesalers supplying packaged beverages to hotels—indeed, it is not excluded that in certain situations a hotel will fall within the definition of an “end user.” In that case, the wholesaler will have to charge the hotel a deposit. It is best to decide whether a given entity should be classified as an end user in the sales contract between the wholesaler and the purchaser. This seems the most reasonable approach, since the parliament has not addressed this issue in any way. It also cannot be assumed that a hotel will never be an end user. This would seem to require wholesalers to perform their own due diligence to determine the intended purpose of the beverages they sell. But this interpretation may raise some doubts, and thus it would be better for the parliament to act on this issue. Otherwise, abuses could easily occur, particularly when neither the wholesaler nor the hotel collects a deposit.

Who must calculate the sales area, and how is it calculated?

Under Art. 44(1) of the amended Packaging and Packaging Waste Management Act, businesses operating retail or wholesale units offering beverage products in packaging covered by the deposit-refund scheme to end users are required to participate in the deposit-refund scheme at least to the extent of collecting deposits. If the sales area exceeds 200 m², then, in addition to collecting deposits, the business is also required to refund deposits and collect empty packaging and packaging waste.

In the Polish legal system, there is no legal definition of the terms “retail trade unit” and “wholesale trade unit.” This may raise legitimate questions, e.g. with respect to restaurants. The act does not specify whether restaurants are to participate in the deposit-refund scheme.

But this does not mean that restaurants are completely excluded from the scheme. It seems that when a particular beverage covered by the deposit-refund scheme is sold as a takeaway, the vendor (restaurateur) should collect a deposit, but if the beverage is consumed on-site, a deposit does not have to be collected. This position seems reasonable, as when a beverage is consumed in a restaurant, the packaging or packaging waste is not taken outside the restaurant, and in practice there is no further circulation of the used bottle or can. In principle, therefore, there is no risk of environmental pollution, and the packaging will be reused, recycled, or properly disposed of by the restaurant.

As for “sales area,” this notion remains undefined under the Packaging and Packaging Waste Management Act. However, the definition in Art. 2(19) of the Spatial Planning and Development Act could be used as a guide—there, sales area is understood as that part of the generally accessible area of a commercial facility constituting a technical and utility unit, intended for retail sale, in which the direct sale of goods takes place (without including the area of services and catering and auxiliary space, e.g. warehouses, offices, exhibition areas etc). In practice, for restaurateurs this means that the vast majority of them will not be required to refund deposits and collect packaging and packaging waste, as the sales area will rarely exceed 200 m². Instead, restaurant operators who charge a deposit on beverages sold for takeaway will have to settle the deposit with a representative entity.

There are also doubts whether the new obligations under the deposit-refund scheme apply to online stores, as it is unclear whether they fall within the concept of either a retail or wholesale unit—terms left undefined. If online stores were regarded as retail units, the next challenge would be to determine their sales area. This would be an absurd attempt, so it should be considered that online stores do not fall into these categories, and online store operators are not subject to the obligation to collect deposits.

The need to obtain permits for waste collection and processing is also an important issue. This obligation does not apply to stores with a sales area of more than 200 m² offering beverages in packages covered by the deposit-refund scheme to end users. While such stores are required to collect packaging and packaging waste under the deposit-refund scheme, this also constitutes non-professional waste collection activity within the meaning of Art. 45(1)(1) of the Waste Act. In turn, the obligation to collect this packaging and packaging waste from small stores rests with the representative entity. Consequently, the obligation to obtain the relevant waste permits will fall solely on the representative entities. It should also be noted that permits will not be required for stores with a smaller sales area which voluntarily choose to participate in the deposit-refund scheme.

However, operators of stores with an area of more than 200 m² should not forget that they are obliged to conclude a written agreement with any representative entity that approaches them, as explicitly stated in Art. 44(6) of the Packaging and Packaging Waste Management Act. On the other hand, smaller stores should pay attention to Art. 45(2) of the Waste Act, which requires them to enter into a written agreement with an entity holding appropriate waste permits, at least to accept waste free of charge.

Who will have to pay the product fee?

Businesses which, contrary to the regulation, choose not to join the deposit-refund scheme, must take into account serious consequences—in particular, the product fee charged to entities failing to achieve the required levels of separate collection of packaging and packaging waste. The difficulty is that achieving adequate levels of collection of such packaging and packaging waste can only be done through participation in the deposit-refund scheme. Starting 1 January 2025, this is the only way provided for by the act. This means that a business cannot assert as a defence that it has nonetheless achieved adequate levels of separate collection, for example via a waste recovery and recycling organisation.

The product fee will be calculated separately for each type of packaging. The product fee for beverage packaging covered by the deposit-refund scheme in 2025 will be only PLN 0.10 per kilogramme, according to the appendix to the regulation of the Minister of Climate and Environment of 9 December 2023. But in 2026 the fee will rise tenfold, to PLN 1/kg, and from 2027, another fivefold, to PLN 5/kg. This approach betrays an understanding that achieving adequate collection levels will be a big problem for businesses, especially in the first year, as the fee starts low and then rises dramatically in year two and again from year three.

It should be noted that the necessity to pay the product fee will also arise when an obligated entity participating in the deposit-refund scheme fails to achieve the levels of separate collection foreseen by law. In such a situation, the “introducer” and the representative entity (operating a deposit-refund scheme for that business) will be required to pay a product fee, in an amount determined by the difference between the required collection level and actual level achieved by the introducer. In such case, the obligation to pay the product fee will be split 50/50 between the two entities.

Who will face administrative fines?

Proper functioning of the deposit-refund scheme is to be enforced by numerous administrative fines provided for in Art. 56(1) of the Packaging and Packaging Waste Management Act. Due to their amount, the fines are primarily deterrent in nature. This is particularly relevant, as liability for violations is in principle objective and independent of the infringer’s culpability. However, the degree of culpability may affect the amount of the fine imposed by the competent authority.

Fines will be imposed on obligated entities for administrative offences in the following situations:

• An entity introducing products in beverage packaging onto the market, or directly introducing products in beverage packaging, fails to keep records of the weight, quantity and capacity of packaging in which it placed beverage products on the market in a calendar year, broken down by type of packaging
• An entity fails to timely conclude an agreement on settlement of deposits collected and refunded, and settlement and exchange of packaging or packaging waste
• An entity fails to submit a copy of the agreement between representative entities, when there is more than one deposit-refund scheme in operation, or submits it after the deadline
• A representative entity refuses to enter into a contract with an introducer of products which has sought a contract with the entity
• The parties fail to retain a contract between introducer and representative entity for at least 5 calendar years after the end of the year when the contract expired
• An introducer fails to provide a representative entity with which it has entered into a contract with the data necessary for performance of its obligations under the deposit-refund scheme, including information on all packaging introduced onto the market in a calendar year covered by the scheme
• An entity fails to ensure collection of packaging and packaging waste from retail and wholesale units and other collection points for packaging and packaging waste covered by the deposit-refund scheme
• An entity fails to provide for transport of packaging to an introducer, or transport of packaging waste to a waste treatment facility
• Operating a deposit-refund scheme without a permit to operate a deposit-refund scheme
• An entity fails to place signs on packaging indicating that the packaging is covered by a deposit-refund scheme or specifying the amount of the deposit
• The operator of a deposit-refund scheme fails to keep records (in paper or electronic form) of the quantity, capacity and weight of packaging and packaging waste collected from operators of retail and wholesale units and other collection points in a calendar year, broken down by units and other collection points, or keeps inaccurate records
• The operator fails to retain the information in the records for 5 calendar years after the end of the year covered by the records
• An entity fails to prepare an annual report on packaging waste or prepares an incomplete or inaccurate report
• An entity fails to submit an annual report on packaging waste or submits it after the deadline
• An entity fails to retain an annual report on packaging waste for 5 calendar years after the end of the year covered by the report
• An introducer fails to prominently display information about the conditions and procedure for returning empty packaging and packaging waste, and the possibility of obtaining a refund of the deposit
• The operator of a retail or wholesale unit with a sales area of no more than 200 m², where end users are offered products covered by a deposit-refund system, fails to collect a deposit
• The operator of a retail or wholesale unit with a sales area of more than 200 m², where end users are offered products covered by a deposit-refund scheme, fails to collect or refund deposits, or fails to collect empty packaging or packaging waste
• The operator of a retail unit with a sales area of more than 2,000 m² fails to conduct, at its own expense, selective collection of packaging waste by type, from products of the type offered by the unit (other than packaging covered by the deposit-refund scheme)
• The operator of a retail or wholesale unit with a sales area of no more than 200 m² fails to enter into a contract with at least one representative entity
• A representative entity refuses to enter into a contract with the operator of a retail or wholesale unit seeking to enter into a contract
• The operator of a retail or wholesale unit with a sales area of more than 200 m² does not enter into a contract with every representative entity seeking a contract
• A representative entity fails to enter into a contract with any business operating a retail or wholesale unit with a sales area of more than 200 m²
• The parties fail to retain such contracts for 5 calendar years after the end of the calendar year when the contract expired
• The operator of a retail or wholesale unit or other collection point, participating in the deposit-refund scheme for at least collecting and refunding deposits and collecting empty packaging and packaging waste, fails to keep the required records or keeps inaccurate records
• The operator of a retail or wholesale unit or other collection point, participating in the deposit-refund scheme only for collection of deposits, fails to keep the required records or keeps inaccurate records
• The operator of a retail or wholesale unit or other collection point fails to retain the information contained in the records for 5 calendar years after the end of the calendar year covered by the information.

The amount of the fines varies. For some violations, fines start at PLN 500—for example, for failing to prominently display information about the conditions and procedure for returning empty packaging and packaging waste and the possibility of obtaining a refund of the deposit. But fines of up to PLN 1,000,000 could be levied for the most serious offences, such as operating a deposit-refund scheme without a permit, or failing to ensure transport and collection of packaging and packaging waste from retail and wholesale units—particularly units participating in the collection of packaging and packaging waste covered by the deposit-refund scheme and also carrying out refunds.

Under the Packaging and Packaging Waste Management Act, proceedings for imposition of administrative fines will take place under the administrative regime—specifically, Section III of the Tax Ordinance (see Art. 58(5) of the Packaging and Packaging Waste Management Act). In most cases, the authority to impose these fines will be vested in the relevant province environmental inspector. A final administrative decision may be challenged before the province administrative court.

What does the transition period mean for businesses?

To enable businesses to prepare smoothly for operating under the new legal framework, the law provides several transitional solutions, involving both currently operating deposit-refund schemes as well as packaging that will be subject to deposits starting 1 January 2025.

Pursuant to Art. 9(1) of the act introducing the deposit-refund scheme, packaging in which beverage products have been placed on the market before the date of joining the deposit-refund scheme may be used until they are depleted, returned or out of stock. This packaging is not subject to refund (Art. 9(2)). This is reasonable, and will enable efficient use of packaging already on the market before the launch of the deposit-refund scheme. In practice, this also means that in the early months of 2025 there will be both deposit and non-deposit packaging on the market.

Deposit-refund schemes currently operating voluntarily can only operate until the end of 2024, but packaging in which beverages were placed on the market before the launch date of the new system can be collected under the existing rules until the end of 2025. In practice, this means that in the first year of operation of the deposit-refund scheme, for some packaging (introduced before 1 January 2025), it will still be possible to obtain a refund of the deposit for example in the form of a voucher for future purchases. This is a helpful approach, as it allows for collection of packaging not covered by the deposit system also after its launch. Therefore, packaging currently introduced can easily be returned in 2025 as well. This will certainly raise the level of collection of packaging and packaging waste, and thus have a positive impact on the environment.

What about VAT?

Deposits have been regulated in the Polish VAT system for a long time. Generally, deposits are collected between VAT payers. An example is the common deposit on beer bottles. Nonetheless, these provisions raise significant doubts. Some guidance is provided by individual interpretations issued by the National Revenue Information Centre.

In connection with introduction of the deposit-refund scheme, the parliament has amended the VAT provisions, to at least in theory clarify the rules with regard to VAT on reusable glass packaging. For this packaging, the introducer will be obliged to settle VAT on unreturned packaging once a year. In practice, this means dual VAT accounting and numerous interpretation problems. Thus businesses may have to deal with a number of future inspections by the tax authorities potentially resulting in imposition of severe sanctions.

The industry strongly warned of gaps and opaqueness in the proposed deposit-refund scheme which could lead to abuse and fraud, unwarranted inspections, and groundless sanctions. Lawmakers were apprised of the assumptions underlying the current provisions, which imply that the deposit will be added when the product is sold. According to businesses, to avoid ambiguity and accounting problems, the deposit should follow the product throughout the sales chain. This solution should prevent potential violations and allow quick settlement of collected and refunded deposits between stores and operators.

While the Ministry of Climate and Environment strongly opposes the idea of delaying entry into force of the deposit-refund scheme, it has responded positively to some signals from the packaging industry. According to public pronouncements, the VAT rules for the deposit-refund scheme will be reviewed and potentially revised to relieve producers and consumers of VAT burdens within the deposit-refund scheme. The ministry indicates that the rules will be framed so that the deposit is not subject to VAT, in line with the experience in other EU countries. At this point, such a change would coincide with an amendment proposed by the Senate during the legislative process of the act introducing the deposit-refund scheme, but that proposal was rejected by the previous Sejm.

Moreover, it is asserted that the deposit should “follow the packaging.” This means that when a manufacturer sells a bottled beverage, it will also be obliged to collect a deposit. Then, the wholesaler who sells the beverage to the store will also be required to collect a deposit. Under this approach, the business selling the beverage to a consumer will also charge a deposit. However, this aspect of operation of the deposit-refund scheme is only a view to what future law should be. An amendment to this end is expected to be proposed in the near future to address these issues. Undoubtedly, the tax aspect of the deposit-refund scheme should be clarified and standardised to truly ensure that environmental requirements are met. And in doing so, the changes must not impose an undue burden on businesses and consumers.

What will be the final shape of the Polish deposit-refund scheme?

The act adopted in the previous parliamentary term introducing a deposit-refund scheme in Poland is raising more and more doubts—going to virtually every element of the operation of the scheme. Unfortunately, the closer we get to launch of the scheme, the more problems businesses will identify. But the current Ministry of Climate and Environment is adamant that the deadline will not be postponed. This means that businesses must make their best efforts to be ready to join the scheme from 1 January 2025. Otherwise, they will have to expect negative consequences, such as product fees or administrative fines. Fortunately for businesses, in the first year of the scheme’s operation the product fee has been set at a modest level.

But whether this is the final shape of the deposit-refund scheme remains an open question. Indeed, there are signs from the Ministry of Climate and Environment that changes to the law may yet take place. Public consultations are being held, and the results will probably be known soon. The media mainly report on clarification of how VAT will apply to the scheme.

Postponement of the effective date of the deposit-refund system for dairy beverage packaging is also in play. Here the change would give businesses more time to prepare for safe storage of such packaging in compliance with sanitary requirements.

There have also been signals from the ministry about the possibility of clarifying the provisions for collecting deposits and expanding the obligation of smaller stores to include collecting packaging and packaging waste. The goal is to tighten the system and reduce the room for possible abuse by participants.

Consumers should particularly note that the deposit-refund scheme may extend to other categories of packaging in future years—for example, food jars. The amount of the deposit on reusable glass packaging will probably be raised over time.

But the potential interim amendment should not alter the substance. The deposit-refund scheme will come into force in Poland at the beginning of 2025, essentially as defined in the act adopted in 2023.

Karol Maćkowiak, Małgorzata Piekarska, adwokat, Adrianna Ogonowska, attorney-at-law, Environment practice, Wardyński & Partners