Distilling rights in Germany from 2018

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Burning rights in Germany
On January 1, 2018, the German spirits monopoly that had been in force until then was replaced by the new Alcohol Tax Act (AlkStG) and the Alcohol Tax Ordinance (AlkStV). In doing so, Germany implemented an EU liberalization requirement and abolished the federal monopoly administration that had existed since 1919. The following article reveals how the law has changed distilling rights and under what circumstances private individuals can legally distill schnapps today.

End of the state monopoly on spirits

Until the law was changed, only small distillers in southern Germany enjoyed distilling rights. Distilling schnapps has a long tradition there in Germany. For many farmers - especially in remote regions - the schnapps represents an important source of income.

During the monopoly, distillers who had their own distilling rights could deliver up to 300 liters of alcohol to the state every year. For so-called "substance owners" - farmers without their own distilling rights - there was an upper limit of 50 liters. For every liter delivered, they received a guaranteed price of 3.50 euros from the federal monopoly administration.

The state resold the brandy bought in this way as industrial alcohol at current market prices. Accordingly, the deal was a distribution of state funds. This should serve to support the approximately 550 agricultural distilleries that made their spirits from the fruit, potatoes or grain they grew themselves.

With the end of the brandy monopoly, the subsidy business also came to an end. Farmers across Germany now have the opportunity to distill their own spirits. The new spirits tax law provides for schnapps distilling with compensation and thus a tax benefit that is unique in the legislation on consumption tax.

The many small distillers, which can still be found primarily in southern Germany, have therefore been dependent on direct marketing since 2018 and have to withstand the competition. Many farmers who distil as a sideline and are financially dependent on it have started to sell their homemade schnapps through farm sales. Good sales can be achieved this way.

However, there is the problem that the import ban on cheap alcohol from other EU countries was suspended in Germany in the 1970s. The reason: It contradicts the principle of competition. The problem: In other EU countries, alcohol is primarily produced from sugar beet, which is particularly cheap. Products made from local fruit, grain and potatoes are therefore significantly more expensive.

Ban on blanket distilling

In addition, the 2018 change in the law stipulates that private individuals may only distil schnapps to a limited extent. Distilling schnapps yourself or a "flat rate" distilling of schnapps is therefore prohibited. Until the Alcohol Tax Act came into force, this was possible on a small scale. In addition, old stills may no longer be used - or certain requirements must be met when using them. The use of stills with a capacity of less than 500 milliliters has been prohibited since 2018.

According to the Alcohol Tax Act, private individuals are no longer allowed to produce high-proof alcoholic beverages themselves. However, you have the option of processing fruit from your own cultivation into schnapps in a so-called settlement distillery. A severance distillery is a place where fruit alcohol may be extracted and purified.

This requires a distilling permit, which you have to apply for at the main customs office. In this way you can produce up to 50 liters of pure alcohol. Permission to operate your own distillery (distillery permit) is only granted to people who can prove that there is an economic need. For example, they have to prove that there is so much distillable material (e.g. fruit) that the approved quota of 50 liters per year is likely to be exhausted. The distillery license is therefore primarily given to fruit growers.

And what applies to pure substance owners? In certain southern German districts, so-called fabric owners have the opportunity to process their fruit in an external compensation distillery. You can find out which distilleries in the vicinity of your own place of residence come into question at the main customs office.

It is also good to know that regional quotas apply to severance pay distilleries - especially in southern and south-western Germany. Farmers only have the chance to obtain a distilling permit if the quota in their region has not yet been exhausted. External compensation distilleries may be used if prior registration has taken place.

If permission is granted by the customs office, the liquor producers have to pay an alcohol tax. This is 1,303 euros per hectolitre of pure alcohol. Alternatively, they can hand over the distilled alcohol to the responsible federal administration for a transfer fee.

Distilling schnapps legally as a private person

In order to be able to burn legally as a private individual, a few bureaucratic steps are necessary. A so-called severance payment declaration must first be filled out and sent to the main customs office in Stuttgart. Registration can be done on paper or electronically. It is important that it must be available to the customs office at least five days before the start of operations.

The authorities then have to wait for the decision as to whether the use of the third-party distillery will be approved. Anyone who receives a positive decision must from then on fulfill the duties of a schnapps distiller, but also has their rights. This includes, among other things, that he has to pay the alcohol tax on his self-distilled spirits.

Important: In Germany moonlighting is a criminal offence. People who distil schnapps illegally are not only liable to prosecution for illegal alcohol distillation, they also evade taxes and thus violate tax regulations. The law is strictly controlled by the customs authorities. Violations can result in severe fines or even a withdrawal of the distilling license (if available) for several years.

Summary of the most important things about the Alcohol Tax Act

Probably the most important change caused by the new alcohol tax law is that the price and purchase guarantee by the federal monopoly administration is no longer applicable. This means that small distillers, such as fruit growers, are dependent on marketing their products directly to consumers. Distilling schnapps is legal in this country only in a severance payment distillery.

Both farmers who want to operate a distillery and private individuals who want to use a third-party distillery must obtain permission from the main customs office. For farmers, however, there must be an economic necessity that has been officially recognized. On this basis, they can produce up to 50 liters of pure alcohol per year of operation and have to pay an alcohol tax on its sale.

Since 2018, private individuals have also no longer been allowed to produce alcohol themselves at home. Anyone who violates the conditions and, for example, cannot produce a permit for the use of third-party compensation distilleries commits a criminal offense and can be prosecuted for illegal alcohol production and tax evasion.

In January 2018, the new alcohol tax law was passed, which reorganizes the distilling rights.


Distilling rights in Germany from 2018


In January 2018, the new alcohol tax law was passed, which reorganizes the distilling rights.

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