A deposit-refund scheme is on the way | In Principle

More than four years after entry into force of the Single-Use Plastics Directive, Poland has adopted a law introducing a deposit-refund scheme. With the new solutions, the country is expected to achieve the high level of separate collection of packaging and packaging waste required by EU law.

Lengthy preparations

Deposit-refund schemes are successfully operating in more than a dozen European Union countries. They apply to different packaging, and thus for example in some countries there is no deposit-refund scheme for glass packaging. But all deposit-refund schemes share a common denominator: they effectively increase the recycling rate and reduce environmental pollution. This issue was discussed in detail by Paulina Wojtkowska in the firm’s 2023 Yearbook.

Art. 9 of the Single-Use Plastics Directive (Directive (EU) 2019/904 of the European Parliament and of the Council of 5 June 2019 on the reduction of the impact of certain plastic products on the environment) requires the member states to reach the following levels of separate collection of waste single-use products listed in Part F of the Annex:

• By 2025, the amount of waste single-use plastic products should equal 77% of such single-use plastic products placed on the market in a given year, by weight
• By 2029, the amount of waste single-use plastic products should equal 90% of such single use plastic products placed on the market in a given year, by weight.

The same provision indicates that to achieve this goal, the member states may, in particular, establish deposit-refund schemes. Unfortunately, after adoption of the directive, Poland did very little to meet the requirements under EU law. Work on the deposit-refund scheme act was pending for several years, but different versions of the drafts covered different categories of packaging. Thus it is hard to say that businesses affected by the new regulation have had enough time to prepare for their new obligations—a complaint repeatedly raised during the legislative process.

Final version of the provisions?

There were many ideas for the deposit-refund scheme in Poland. It was debated whether the deposit should apply to all bottles made of plastic, or just some of them. The content and size of packaging subject to the deposit-refund scheme were also discussed.

Ultimately, the act adopted by the parliament covers three categories of beverage packaging:

• Disposable plastic beverage bottles with a capacity of up to three litres, including their plastic caps and lids (excluding glass or metal beverage bottles with plastic caps and lids)
• Metal cans with a capacity of up to one litre
• Reusable glass bottles with a capacity of up to 1.5 litres.

The inclusion of all metal cans with a capacity of up to one litre in the deposit-refund scheme appears to be a sound solution. The original draft did not include such cans at all, and subsequent versions included only aluminium cans. Thus lawmakers finally took into account the views of the food industry.

But despite numerous demands, the parliament did not extend the deposit-refund scheme to disposable glass bottles. So, for example, miniature liquor bottles (popularly known as małpki or “monkeys”)—glass bottles with a capacity of up to 200 ml—will remain outside the scheme. As reported by numerous industry organisations, every day Poles down on average nearly three million miniature bottles of liquor, translating into nearly 1.1 billion małpki in packaging waste annually. The lack of a deposit means that a sizable share of these miniatures will continue to be collected along with other municipal waste.

Organisation of the deposit-refund scheme in Poland

Pursuant to Art. 13a of the amended Packaging and Packaging Waste Management Act, a deposit-refund scheme means a system in which a deposit is charged on the sale of products in single-use or reusable beverage packaging referred to in Annex 1a to the act, which is refunded to the end user when the packaging covered by the deposit scheme or the packaging waste generated from the packaging covered by the deposit system is returned.

Therefore, the essence of the deposit-refund scheme is to encourage end users (through financial means, i.e. the deposit) to return packaging and packaging waste so it can be reused or recycled.

The parliament identified a number of entities participating in the deposit-refund scheme, while, at the same time, assigning them a whole spectrum of obligations, which will be discussed below. These entities include:

• Introducer of beverage-packaged products: an undertaking conducting the business of placing on the market beverage products in disposable or reusable beverage packaging, referred to in Annex 1a to the act, excluding direct sales consisting in the supply of beverages in packaging by a direct introducer of beverage-packaged products
• Direct introducer of beverage-packaged products: an undertaking conducting the business of placing on the market reusable beverage-packaged products (beverages) referred to in item 3 of Annex No. 1a, conducting exclusively direct sales consisting in the delivery of beverages in packaging by the direct introducer to a place agreed between that introducer and the purchaser, and at the same time recovering by that introducer packaging of products of the same type, placed on the market by the same introducer
• End user: a user of beverage products in single-use or reusable beverage packaging, referred to in Annex 1a, who purchases them with the purpose of consumption by themselves or other persons and not for further sale.

Pursuant to Art. 40g(2) of the amended act, the deposit-refund scheme is operated by a representative entity. For an entity to operate a deposit-refund scheme, it must meet several conditions:

• It must be a joint-stock company established in Poland, formed by introducers of beverage packaging products or direct introducers, employers’ associations representing them, or chambers of commerce.
• Only the foregoing entities may be its shareholders.
• It must carry out the obligations set forth in the act, and the income generated by its business must be used solely for its statutory purposes.
• It may only perform activity related to the management of packaging and packaging waste, and organisation and operation of a deposit-refund scheme
• It must hold an appropriate permit (Art. 40j(1))
• The company’s share capital must be at least PLN 5 million and cannot be raised by open subscription or a loan, or be encumbered in any way.

The parliament also included a number of specific regulations regarding the equity of a representative entity, bank or insurance guarantees it must hold, and the entity’s shares (Art. 40g(6)–(8)).

It is apparent at first glance that these regulations were formulated along the lines of regulations on recovery organisations in the Act on Obligations of Businesses Concerning Management of Certain Waste and on the Product Fee of 11 May 2001. Therefore, these are proven regulations whose effectiveness has been verified in commercial practice.

Importantly, more than one deposit-refund scheme will be allowed to operate. In such a situation, the representative entities will have to conclude an agreement between themselves governing the terms and conditions for settling deposits collected and refunded, as well as settling and exchanging packaging or packaging waste collected under the deposit-refund schemes they operate. This type of agreement should be concluded before the launch of any subsequent deposit-refund scheme.

Who must participate in the deposit-refund scheme?

The obligations of vendors (retail or wholesale) depend on the size of the sales area where products with packaging covered by the deposit-refund scheme are offered to end users:

• Sales area of no more than 200 m²—the undertaking must participate in the deposit-refund scheme at least to the extent of collecting deposits, and may participate in the scheme with respect to refunding deposits and collecting empty packaging and packaging waste.
• Sales area of more than 200 m²—the undertaking must participate in a deposit-refund scheme to the extent of collecting and refunding deposits and collecting empty packaging and packaging waste.

Additionally, an undertaking operating a retail unit with a sales area of more than 2,000 m² will be obliged to carry out, at its own expense, selective collection of packaging waste of packaged products offered in the retailer’s product line, according to the types of packaging from which the waste was generated, excluding packaging covered by the deposit-refund scheme.

In this respect, businesses will need to enter into an agreement with at least one representative entity. Conversely, representative entities cannot refuse to conclude an agreement with an undertaking requesting to do so.

The amount of the deposit was an important issue discussed during the legislative process. The act sets a maximum of PLN 2 (Art. 40m(1)), but the specific rate will be set by an executive regulation. Pursuant to the draft regulation on the Government Legislative Centre website, the deposit for each type of packaging will be PLN 0.50. Significantly for consumers, they will not have to present a receipt or other proof of purchase to receive a refund of the deposit (Art. 40g(1)(4)).

Until the very end, lawmakers considered the issue of including VAT in the deposit. A Senate resolution proposed that the deposit for products in disposable or reusable packaging should not be included in the VAT base, but this was ultimately rejected. This means that the deposit for reusable packaging is subject to VAT. This issue is not clear with respect to the deposit for disposable packaging, as to which an express provision is lacking. These doubts are particularly pressing, as Art. 29a (6)(2) of the VAT Act of 11 March 2004 provides that the tax base includes packaging costs. Therefore, it is too bad that the parliament rejected an amendment that would have resolved a number of interpretive doubts. Under the current wording of the act, there is a risk of non-compliance by introducers of packaged products, exposing them to penalties imposed by the tax authorities.

Assessment of the regulation

The act introducing the deposit-refund scheme in Poland was much needed. The experience from other EU countries shows that this is an effective measure in the fight for a cleaner environment. Also, an efficient deposit-refund scheme will allow Poland to meet the requirements for selective waste collection resulting from EU law.

But the act is not without flaws. First, it does not include a sizable set of packaging waste. This refers to disposable glass bottles, which do not fall under the deposit-refund scheme. The regulations regarding VAT coverage of deposits for disposable packaging remain unclear, which could negatively affect businesses. There are also doubts about the way the changes are being processed. Political declarations for establishing a deposit-refund scheme were made as early as 2019, but the final wording of the provisions was not worked out until four years later.

The effects of the lawmakers’ delay may be seen as early as 2025. As of 1 January 2025, the deposit-refund scheme will be in place, meaning that entities participating in the scheme have less than a year and a half to prepare for the changes and new obligations. Meanwhile, representatives of the food industry claim that it will take about two years to prepare the system. If the obligated entities fail to meet the requirements of the act within such a short period, they will face administrative penalties, which could be as high as PLN 1 million.

Karol Maćkowiak, Environment practice, Wardyński & Partners