The European Commission finds Poland’s tax on the retail sector in breach of EU state aid rules | SSW Tax Alert


According to the decision issued on Friday 30 June 2017, the European Commission found that a Polish tax on the retail sector is in breach of the EU state aid rules. The Commission concluded that the progressive tax rates based on turnover give companies with low turnover a selective advantage over their competitors.

As reported in our previous tax alerts, the Commission launched in September 2016 a detailed investigation into the Act of 6 July 2016 on retail sales tax and required Poland to suspend the application of the progressive rates until the Commission could complete its state aid assessment.

Under the Polish measure, companies operating in Poland in the retail sector would have paid a monthly tax based on their turnover from retail sales. The tax featured a progressive rate structure with three different brackets and rates:

  • a tax exemption would have applied to the part of the company's turnover below PLN 17 million (approx. EUR 4.02 million);
  • a tax rate of 0.8% would have applied to the part of the company's turnover between PLN 17 million and PLN 170 million (approx. EUR 40.2 million); and
  • a tax rate of 1.4% would have applied to the turnover in excess of PLN 170 million (approx. EUR 40.2 million).

The Commission does not question Poland's right to decide on its taxation systems or on the objective of different taxes and levies. However, the tax system must comply with EU law, including state aid rules, and cannot unduly favour certain companies over others. The Commission's in-depth investigation has shown that the progressivity of the tax rates would unduly favour certain companies over others, depending on their turnover and size. Poland has not demonstrated that the progressivity of the retail tax was justified by the nature or objective of the retail tax to raise revenues, or that companies subject to the higher rates would have a higher ability to pay.

The decision requires Poland to remove the unjustified discrimination between companies under the retail tax and restore equal treatment in the market.

Should you have any questions regarding consequences of the Commission's decision, please do not hesitate to contact us.

Written by:

Łukasz Karpiesiuk, Partner, Tax Advisor

Patrycja Goździowska, Partner, Tax Advisor