The European Commission has issued a preliminary ruling that the Polish retail sales tax introduced by the Act of 6 July 2016 is incompatible with EU state aid rules. The Commission ordered the suspension of the tax until the final resolution of the case.

Poland recently introduced a progressive tax on retail sales including three thresholds and tax rates:

  • 0% for monthly retail sales revenue less than 17 million PLN (approximately EUR 3.84 million);
  • 0.8% for monthly retail sales revenue between 17 million PLN and 170 million PLN (approximately EUR 38.4 million);
  • 1.4% for monthly retail sales revenue exceeding 170 million PLN.

According to the Polish government, a new tax is necessary to finance new social benefits.

The European Commission does not question the appropriateness of the introduction of the new tax. However, in the preliminary Commission's view there is no justification for the introduction of differentiated rates of taxation in relation to enterprises achieving different revenue, because all entrepreneurs are in a comparable situation. Therefore, Poland granted a selective advantage for companies achieving lower revenues by introducing differentiated rates. The amount of uncollected taxes from businesses eligible for the lower tax brackets may constitute unlawful state aid.

The European Commission has asked Poland to provide further clarifications on the new tax. It has also allowed all interested parties to submit comments by 4 December 2016. Poland is also obliged to suspend the application of the Act until the Commission reaches its final decision. The Commission is empowered to order the recovery of state aid if Poland fails to suspend the tax, whereby Poland would have to recover uncollected taxes from companies which qualified for the lower tax brackets.