On June 30, 2017 the European Commission issued a press release announcing that after an in-depth investigation it has found that a Polish tax on the retail sector is in breach of EU state aid rules. The Commission concluded that the progressive tax rates based on turnover give companies with low turnover an advantage over their competitors. The Commission also states that 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.

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).

According to the European Commission, its 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.

According to the Commission 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.

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.

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