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Poland’s tax on the retail sector in breach of EU State aid rules

On June 30, 2017, the European Commission has found that a Polish progressive tax on the retail sector is in breach of EU state aid rules.

More precisely, following a complaint, the Commission opened an investigation in September 2016 concerning a Polish measure that allows companies operating in Poland in the retail sector to pay a monthly tax based on their turnover from retail sales. The tax is based on a progressive rate structure with three different rates: (i) a tax exemption on the part of the company’s turnover below 17 million Polish zloty (approximately €4.02 million); (ii) a taxstock-photo-tax-concept-with-wooden-block-on-stacked-coins-313474802 (1) rate of 0.8% on the part of the company’s turnover between 17 million and 170 million Polish zloty (approximately €40.2 million); and (iii) a tax rate of 1.4% on the turnover in excess of 170 million Polish zloty.

According to the Commission, the progressivity of the tax rates is selective and it favours smaller companies, that would either pay no retail tax at all or face a lower average tax rate than larger competitors. The Commission has recognized that in absolute terms smaller companies should pay less tax than their larger competitors, but still in the same proportion to their turnover.

Poland has also not demonstrated that the progressivity of the retail tax is justified by the objective of the retail tax to raise revenues or that companies subject to the higher rates would have a higher ability to pay.

As a result, Poland must remove the unjustified discrimination between companies under the retail tax. However, Poland did not collect this new tax and no State aid was effectively granted. Therefore, there is no need for recovery.

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