EU Commission opens in-depth investigation into Slovakia's tax on the food retail sector

The investigation opened today concerns a tax adopted by Slovakia in December 2018, which applies to food retailers that operate in the country. The tax entered into force on 1 January 2019, and the first payment would have been due by the end of April 2019. The Commission has also today issued an injunction, requiring Slovakia to suspend the application of the measure until the Commission has concluded its assessment under EU State aid rules.

Under the tax, food retailers would pay a quarterly tax amounting to 2.5% of their total turnover. However, food retailers would be fully or partially exempted from the payment of the tax, if they fulfil one of several conditions concerning their size, geographic scope of operation in Slovakia and/or type of activities. Furthermore, retailers that are members of trading alliances or franchises would also not pay the tax, despite the fact that their combined turnover is comparable to that of the largest retailers.

The application of these tax exemptions would result in only seven food retailers having to pay the tax – six of them owned by companies based in other Member States. The only Slovak-owned retailer subject to the tax would have a significant part of its turnover exempted.

Slovakia did not notify the tax to the Commission. The Commission started to look into the matter following information it received from stakeholders. In December 2018, the Commission also received a formal complaint alleging that the Slovak retail tax is in breach of EU State aid rules.

The Commission does not question Slovakia's right to introduce a tax applicable to the food retail sector. At the same time, the tax system should respect EU law, including State aid rules, and should not unduly favour a particular type of companies, for example, companies operating in a smaller number of districts or members of trading alliances.

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