Retail tax in Poland and Hungarian advertisement tax do not breach the European Union law – opinion of Advocate General of the CJEU

Polski

On 15 October 2020, Juliane Kokott who is the Advocate General of the Court of Justice of the European Union  (CJEU) issued the opinion in case: Republic of Poland vs The European Commission. According to the Advocate General’s standpoint, Polish regulations on the tax on retail sales do not breach the European Union law.

The opinion of the Advocate General of the CJEU

On 15 October 2020, the Advocate General of the CJEU delivered the opinion in which it is stated that, despite its progressive nature, the Polish retail tax does not violate European Union law and the choice of this form of taxation falls within discretion of the Polish legislator. Consequently, the tax to be implemented by Poland, cannot be deemed as incompatible with the EU law. 

The ruling of the EU Court

The tax was a subject of the European Commission’s proceedings against Poland in respect of violation of EU law. In the Commission’s view, the construction of the tax violates the EU rules regarding State aid, which led the Commission to issue a decision ordering the tax to be suspended. The decision was subject to a Polish complaint to the General Court of the European Court (the Court).

On 16 May 2019, the EU Court issued a judgment with regards to Polish Government's complaint against the Commission's decision. According to the EU Court judgment, the Commission’s decision was invalid, and Poland is entitled to implement the new tax. Nevertheless, the Commission exercised its right to appeal the verdict, and the CJEU has been seized of the matter. 

The Opinion’s implications

Although decisions of the Advocate General of the CJEU are not legally binding, the practice so far has shown that the CJEU will likely agree on the Advocate General's opinion in the tax. According to media information, the verdict is to be issued by the CJEU until 2021.

Consequently, there is a possibility that starting from January 1 2021, the Polish retailers will be obliged to fulfill their obligations to be imposed by the new provisions. We will monitor the issue and further steps of the Polish Ministry of Finance in this respect.

Retail tax - summary

The Act on the retail tax (the Act) entered into force in Poland on 6 July 2016. Pursuant to the provisions of the Act, the taxable base is revenue from retail sales. The revenue surplus over PLN 17 million monthly is subject to taxation.  The tax is progressive with two tax rates:

• 0.8% of the tax base - in the part in which the tax base does not exceed
  PLN 170 million and
• 1.4% of the excess tax base over PLN 170 million - in the part in which the tax base exceeds PLN 170 million.

The taxpayers shall be obliged to submit their tax returns to the revenue office monthly, by the 25th day of the month following each subsequent month.

The Act has been suspended until 1 January 2021 as a result of the Commission’s proceedings and the EU Court litigation.  

If you have any additional questions regarding the tax on retail sales, please feel free to contact us.