Poland wins EU Court case against EC regarding retailer tax

In September, the EC launched its breach of EU law procedures against Poland in connection with the retailer tax. According to Brussels, its construction favoured smaller shops, which could be seen as public aid. Leszek Szymański/PAP

Poland has won the case in the General Court of EU against the European Commission regarding retailer tax. The court ruled on Thursday that the EC had made a mistake by considering the tax as state aid and annulled the EU's decision on the contested measure.

The verdict is not final, and subject to appeal.

The EC has two months for the appeal but it may only refer to the formal aspects of the judgment of the EU Court, not its content. Any appeal will be considered by the Court of Justice of the European Union (CJEU).

The Thursday ruling of the EU Court means that Poland will be able to collect again the suspended tax on the retail sector. However, as the decision is appealable, the tax will remain suspended until end-2019 Poland's Finance Ministry said on Thursday.

On September 1, 2016, Poland introduced a retailer tax imposing 0.8 percent revenue taxation on retailers with monthly sales from PLN 17 million (EUR 4 mln) to 170 million (EUR 40 mln), and 1.4 percent for shops with sales above PLN 170 million.

In late September 2016, the EC launched its breach of EU law procedures against Poland in connection with the retailer tax. According to Brussels, its construction favoured smaller shops, which could be seen as public aid. In effect, the Commission ordained the tax to be suspended for the time of its review by EC officials.

In late November/early December 2016 Poland charged the EU's decision in whole to the CJEU, accusing the Commission of erroneously qualifying the tax as public aid. Poland also accused the EC of violating EU laws in ordaining the immediate suspension of the tax's progressive scale and insufficient substantiation of its decisions on the matter.

The Polish Ministry of Finance argued then that the EC's decision could be considered as discriminating against Poland in the context of similar taxes operating in France and Spain.

On Thursday, the General Court of the EU ruled that the EC was wrong. It came to the conclusion that "the Commission was not entitled to infer solely from the progressive structure of the new tax on the retail sector that that tax entailed selective advantages."

The court also stated that it can be presumed that undertakings with high turnovers might, through various economies of scale, have proportionately lower costs than those with smaller turnovers.

"Therefore the Commission was also wrong to consider that the objective of the tax on the retail sector was different to that put forward by the Polish authorities."

Moreover, the court pointed out, "the Commission failed to establish in the contested decisions the existence of a selective advantage introducing a means of differentiating between operators in a comparable legal and factual situation in the light of the objective set by the Polish legislature for the tax on the retail sector. As a result, the General Court annuls the Commission’s final decision," the press release on the court's website read.

In reference to the Commission’s decision to initiate the procedure against Poland, the EU court noted that it is "based on a manifestly incorrect analysis" and was not justified.

The EU court is one of the two bodies of the Court of Justice of the European Union.