Poland’s suspended retail tax law is upheld by European Tribunal

The long-awaited decision of the European Tribunal announced on Thursday morning on what was known as Poland’s “tax on supermarkets” has gone the government’s way.

The tax was effective as of September 1, 2016 but its suspension was ordered by the European Commission less than three weeks later, pending an investigation into whether the tax was discriminatory towards larger retail entities and therefore a form of protectionism.

According to the regulations, smaller outlets whose takings were less than PLN 17 mln (EUR 4 mln) per month were exempt from the tax, which then was charged at two rates, depending on sales: a basic rate of 0.8 percent and a premium rate of 1.2 percent on sales over PLN 170 mln (EUR 40 mln) per month.

The idea behind the tax, according to legislators, was to level the playing field on the retail market, where many larger companies were able to take advantage of their scale in order to optimise Corporate Profits Tax using offshore companies and transfer pricing.

Trade organisations representing larger shops had complained to the Commission on the grounds that the gradation of the tax was favouring the locally-owned smaller shops over foreign competition, which was not in the spirit of free competition within the EU.

The EC investigation found against Poland, and so the government filed an appeal to the Tribunal.

The Chairman of the large shop trade lobby, (POHiD), Renata Juśkiewicz told retail website Wiadomoscihandlowe.pl that they will appeal the matter, as it is a preliminary and not a final verdict of the Luxembourg court.

The tax had been expected to earn around PLN 1.8 bn (EUR 400 mln) per annum on the basis of calculations of retail sales at that time. Sales in larger shops are now around 20 percent higher than they were at stage.

However, a claw-back is not likely, as the finance ministry has suspended the calculation of the tax each year, while awaiting the verdict.