New Licence Introduced for Microbreweries

Singapore’s microbreweries will benefit from a new licence type introduced specifically to cater to their business model, significantly reducing their business costs.

From 1 April 2012, a licence for breweries producing less than 1.8 million litres of beer or stout will incur a fee of $8,400 annually. Previously, microbreweries paid the same fee as large-scale breweries – $43,200 annually. The new lower fee tier for microbreweries comes on the back of a review by Singapore Customs of the effort involved in administering the licence for smaller-scale breweries and benchmarking with international practices.

Singapore’s nine microbreweries were jubilant. Said the General Manager of Paulaner Bräuhaus Singapore Alexander Buchner: “We gladly accepted the review as it will help us to ease our cost structure and have a more feasible operation in the long-term.”

Added the Director of Reddot BrewHouse and brewmaster Ernest Ng: “The new licence type is more equitable. It will save microbreweries at least $34,800 per year, which could be better spent on R&D to improve our performance and quality of our products.”

Besides welcoming the cost savings, brewer and owner of AdstraGold Microbrewery Chia Shee Yap was gratified by Singapore Customs’ responsiveness to sentiment among microbrewery players. He said: “AdstraGold is absolutely delighted and pleased that Customs has taken a serious view of the feedback from the microbrewery industry, and has reclassified microbrewery and factory brewery licence fees separately.”

The manufacture of dutiable goods such as alcohol requires a licence under the Customs Act. Hence microbreweries, which carry out fermentation and manufacturing of ale, beer, stout or porter similar to the operations of a full-scale brewery, had been duly licensed under the same category for the production of alcohol.

However, this licence was conceptualised for large manufacturing plants, whose operations differ from microbreweries.

The production volume of a microbrewery is significantly lower. A full-scale brewery can produce close to 120 million litres of beer a year while a microbrewery’s production is typically less than half a million litres a year. Nevertheless, Singapore Customs has used the generally accepted maximum quantum of 15,000 barrels a year – the equivalent of 1.8 million litres – to define a microbrewery.

The manufacturing processes of a microbrewery are also simpler. The set-up of a microbrewery is one of a closed-loop system from start of the fermentation process to the point of excise duty payment, when the final fermented product is transferred to the dispensing tank ready for direct serving. Beer brewed by a microbrewery is generally served at its own pub and restaurant.

In a full-scale brewery however, excise duty payment takes place only after the finished product has been bottled or canned, sorted and packed, ready for local release. The products could also be exported. Additional resources are also required for monitoring and managing a separate licensed storage area and a bottling production line, and the processing of remissions of duty and Goods and Services Tax for breakages and incorrect declarations due to the greater volume of beverage produced.

Microbreweries therefore pose a lower revenue risk and require less administrative effort. Hence it would be equitable to charge them a lower licence fee.

It is also anticipated that introducing the new licence type will boost the craft brewing scene in Singapore. Explained Mr Devin Kimble, Managing Director of MENU Food & Drinks Group, which operates Brewerkz Restaurant & Microbrewery: “It is wonderful that the economic and job creation benefits of microbreweries for the local economy have been acknowledged by making it easier particularly for start-up microbrewers to get into and stay in business.

Without a doubt the new licence will expand the microbrewing industry in Singapore. While some might view this as increased competition for incumbent brewers, we at Brewerkz feel that it will serve to grow demand for greater beer diversity and that will greatly benefit all of us. Using the United States as an example, the craft brewing part of the beer industry is growing at a double digit clip while overall demand is falling. By making it less expensive to operate a brewery in Singapore, there should be a similar renaissance here.”

Find us on Facebook

Copyright © 2012 Singapore Customs. All Rights Reserved.
Best viewed at 1024 x 768 resolution with IE 7.0 or FireFox 2.0 and above.