In Germany, alcohol may generally only be produced in distilleries that are sealed by the customs authorities (sealed distilleries). The amount of alcohol produced is measured to determine the tax to be paid. An exception to this principle are so-called settlement distilleries. Selling distilleries are not sealed and the alcohol tax is estimated on a flat-rate basis according to the type and quantity of raw materials processed.

You need a distillation permit in order to be allowed to produce alcohol in a severance distillery approved by the main customs office within a certain period of time. The distillation declaration with which you apply for the permit also serves as a tax return for the alcohol tax.

The tax amount is calculated on the basis of so-called yield rates, which are set out in a list of raw materials. The yield rate indicates the amount of alcohol that can be obtained from 100 kilograms or 100 liters of the raw material used. A reduced tax rate of currently EUR 1,022 per 100 liters of pure alcohol applies to the distillation of alcohol, but only within the framework of fixed quotas.

Example:

• You process 100 kilograms of apples. The yield rate for apples is 3.6, so you have to pay tax on a flat rate of 3.6 liters of alcohol. The reduced alcohol tax is 3.6 liters x 1,022 EUR /100 liters = 36.79 EUR.

Even if you do not operate the distillery yourself but, for example, have your self-produced fruit distilled in a settlement distillery (owner distillation), you must submit a settlement declaration and pay alcohol tax if applicable.

The alcohol enters free circulation for tax purposes when it is produced. This means that it can be traded within Germany without tax restrictions.

You can produce alcohol in your severance distillery on behalf of third parties from its raw materials (contract distilling).

Special rules apply if you wish to make use of simplified contract distilling. This procedure, which requires approval, allows you to produce alcohol "on a contract basis" at the expense of the quota of a distillery other than your own, without having to transport the raw materials to the other distillery. In this case, you produce the alcohol in your own distillery.