Following a complaint, the Commission opened an in-depth investigation in September 2016 into the measure. Poland did not collect this new tax and, as a result, no State aid was effectively granted. Consequently, there is no need for recovery in this case.
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.
Under the Polish measure, companies operating in Poland in the retail sector would pay a monthly tax based on their turnover from retail sales. The tax features a progressive rate structure with three different brackets and rates:
- a tax exemption applies to the part of the company's turnover below PLN 17 million (approximately €4.02 million);
- a tax rate of 0.8% applies on the part of the company's turnover between PLN 17 million and 170 million (approximately €40.2 million); and
- a tax rate of 1.4% applies on the turnover in excess of PLN 170 million (approximately €40.2 million).
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. With this progressive tax rate structure, smaller companies would either pay no retail tax at all (if their turnover is below PLN 17 million) or face a lower average tax rate than larger competitors. This would give companies with a lower turnover an unfair economic advantage. Smaller companies should of course pay less tax than their larger competitors in absolute terms, but still in the same proportion to their turnover.
Poland has not demonstrated that the progressivity of the retail tax was 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.
Today's decision requires Poland to remove the unjustified discrimination between companies under the retail tax and restore equal treatment in the market.
The Commission started to look into the matter in February 2016, following media reports about the Polish authorities' plans to establish a progressive tax on the retail sector. Poland did not communicate with the Commission about the design of the tax and did not notify this measure to the Commission before its implementation. In August 2016, the Commission also received a complaint alleging that the Polish retail tax involved incompatible state aid.
On 6 July 2016, the Polish Parliament adopted the Act on retail sales tax. The Act entered into force on 1 September 2016. On 19 September 2016 the Commission opened an in-depth investigation and required Poland to suspend the application of the progressive rates until the Commission could complete its state aid assessment. The suspension injunction was necessary, since the new tax entered into force on 1 September 2016 and provides for monthly payments. By preventing the granting of the aid, the suspension injunction ensured that no companies will have to pay back unlawful aid.
This is not the first time the Commission has looked at progressive turnover-based taxes under EU state aid rules. On 4 July 2016, the Commission found that Hungary's food chain inspection fee and tax on tobacco sales were incompatible with EU state aid rules. On 4 November 2016, the Commission found that the progressive rates of the Hungarian advertisement tax were also in breach of EU state aid rules.
The non-confidential version of the decision will be made available under the case number SA.44351 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.