Poland’s 23% VAT on bottled water draws scrutiny as juice-based drinks pay 5%
Poland applies 23% VAT to bottled natural water while qualifying drinks containing at least 20% juice receive a 5% rate. EY says the gap affects consumer choices and competition across a beverage market in which still water leads by volume but carbonated drinks lead by value.
Tax rates divide competing beverages
Poland’s treatment of bottled water is drawing criticism from tax advisers who say the system favors some sweetened and flavored alternatives. Natural bottled water generally carries the standard 23% value-added tax, while certain fruit and vegetable drinks containing at least 20% juice qualify for a reduced rate of 5%.
The Ministry of Finance confirmed this framework in March 2025, according to Infor. Milk drinks, plant-based beverages and specified fruit and vegetable drinks can receive the 5% rate, while water supplied through mains, tankers or other transport is taxed at 8%. The distinction applies even though the Ministry of Health recommends natural water as the healthiest choice.
Dorota Pokrop, an EY Tax Advisory partner and co-author of a report on beverage VAT, told PAP Biznes that a flavored drink made mostly from water can meet the lower-rate threshold through juice concentrate. Qualifying non-alcoholic drinks may retain the 5% rate regardless of carbonation or the presence of added sugar, sweeteners, flavorings, caffeine or taurine.
Water leads volume but trails in market value
The latest available figures cited by Infor put Poland’s carbonated-drinks market at 21 billion złoty. Still water accounted for 9.9 billion złoty, juices, nectars and non-carbonated drinks for 8.9 billion złoty, energy drinks for 3.9 billion złoty and flavored-water products for 1.55 billion złoty.
Still-water sales through retail and the HoReCa channel reached 4.26 billion liters in 2023, compared with 2.06 billion liters for carbonated drinks. In 2015, the corresponding volumes were 3.4 billion liters and 2.17 billion liters. Water therefore gained volume while carbonated-drink consumption declined slightly, but carbonated products still generated substantially more revenue.
EY’s analysis describes water as particularly sensitive to price changes. Using Polish market data for 2015-2023, the firm estimated that a 1% rise in the price of water produces a 0.83% increase in consumption of other beverages. Pokrop said consumers tend to move toward close substitutes, especially flavored waters and non-carbonated drinks.
Reform options carry different budget effects
The competitive gap extends beyond the headline VAT rates. Pokrop said juice-containing drinks have been largely excluded from Poland’s sugar tax for years. Under the Finance Ministry’s interpretation of deposit rules, unreturned bottles are also taxed at the VAT rate applicable to their contents: 23% for a water bottle and 5% for a qualifying flavored-water bottle.
EY estimated that equalizing VAT for still water and drinks containing at least 20% juice at the reduced 5% rate would lower annual VAT revenue by 1.82 billion złoty by 2028, equivalent to 0.039% of GDP. Higher water consumption would only partly offset the revenue lost from cutting the rate. Applying the standard 23% rate to both categories would instead increase annual VAT revenue by an estimated 2.04 billion złoty by 2028, or 0.043% of GDP, although consumption of the newly more expensive drinks would fall.
Pokrop said EY found no other European Union country where natural water is taxed more heavily than its direct substitutes. She also noted that beverage producers have different interests: water-only companies cannot use the juice threshold, while diversified manufacturers may adjust formulations to qualify for the lower rate. Any change would therefore redistribute costs and competitive advantages across bottlers, drink manufacturers, retailers and consumers.
