EU Court Rules in Favour of Poland

An important decision was made last week that may bring changes to the fiscal system in Poland. EU Court announced its ruling regarding the Polish retail tax. EU courts or judiciaries decided Poland is allowed to introduce the levy and that the related Polish fiscal law provisions do not infringe the EU fair trade regulations.

The new progressive retail tax, which according to the intentions of the legislators was supposed to be imposed on big supermarket chains (or rather, as it was stipulated in the provisions, retail entities whose monthly revenue exceeded 17 million PLN) in 2016.

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However, the European Commission began questioning the legality of the solution right from the onset and the new tax had to be put on hold immediately as the Polish government did not want to get in trouble with EU court authorities. A bill was passed that froze the implementation of the retail tax until the end of 2019.

The matter was taken to the EU Court of Justice. The European Commission argued that the provisions Poland was to introduce constituted public aid (as the regulation favored smaller business entities) and infringed the common market principle.

The General Court did not share this view and declared that the Commission incorrectly classified the measure as state aid and that the solution is indeed legal. Both parties hold the right to apply against the decision.

The Polish government is now free to implement the levy and will do this once the court ruling becomes final. Experts warn that retailers are likely to transfer the tax onto their customers and that the new law will result in inflated prices. Another possible outcome is aggressive cost-cutting and curbed investment. From the government’s point of view, the tax will generate additional budget revenue. The legislators predict the new law will be applied to approximately 200 business entities.