Slovakia tax on food retail sector under EU investigation for illegal state aid

By Davide Anghileri, University of Lausanne, Switzerland

The European Commission will conduct an in-depth investigation into Slovakia’s tax on the food retail sector to determine if tax exemptions provided some retailers grant a selective advantage over their competitors in breach of EU State aid rules.

Slovakia tax under investigation

According to a 2 April EU announcement, in December 2018 Slovakia adopted a tax which provides that food retailers would pay a quarterly tax amounting to 2.5% of their total turnover. However, the law exempts from the payment of the tax food retailers that fulfill 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 even though their combined turnover is comparable to that of the largest retailers.

The outcome of the tax exemption is that only seven food retailers would pay the tax. Among these seven, six are based in other Member States and the only Slovak-owned retailer subject to the tax would have a significant part of its turnover exempted.

Considering that the tax entered into force on 1 January and the first payment would have been due by the end of April 2019, the Commission issued an injunction, requiring Slovakia to suspend the application of the measure until the Commission has concluded its assessment under EU State aid rules.

The Commission justifications

 The Commission began looking into the matter following information received from stakeholders as Slovakia did not notify the tax to the Commission. Moreover, the Commission also received a formal complaint alleging that the Slovak retail tax is in breach of EU State aid rules last December.

The Commission believes that the application of the Slovak food retail tax with its exemptions confers a selective advantage on companies that are exempted from the tax and therefore involves State aid within the meaning of EU rules. Furthermore, the Commission considers that the measure may affect consumers negatively, notably through an increase in prices or a reduction of consumer choice on the Slovak retail market.

Hence, the Commission judges that the relevant tax exemptions are not justified by the logic of the Slovak tax system, which is to redistribute retail groups’ profits within the food supply chain to the benefit of farmers and food producers. Moreover, Slovakia has so far not demonstrated why the companies exempted from the tax are in a different situation compared to the companies paying the tax.

The Commission will now investigate further to determine if its initial concerns are confirmed. The opening of an in-depth investigation gives interested third parties the opportunity to comment on the measures under assessment. It does not prejudge the outcome of the investigation.

The aim of the investigation is not to question Slovakia’s right to introduce a tax applicable to the food retail sector. In fact, under the EU system, Member States are competent to decide on their taxation systems.

However, Member States must also ensure that their tax systems are in line with EU rules. In particular, the application of their taxes should not unduly favor a particular type of companies, for example, companies operating in a smaller number of districts or members of trading alliances and result in the granting of State aid unless it is compatible with EU rules.

It is important to note that the Commission has assessed and reached decisions against turnover taxes on the retail sector in other Member States because they unduly introduce discrimination in the tax treatment of certain retailers compared to others.

The Commission issued a Communication “A European retail sector fit for the 21st century” to encourage Member States to ensure a level playing field with all business sectors so that any specific tax is justified and does not unduly put at a disadvantage certain retailers.

As stated in the Commission communication, application of less restrictive measures contribute to a better performing retail sector, benefit consumers, and have positive spill-over effects on manufacturing and other sectors.

Finally, the Commission also communicated an ongoing investigation concerning the same tax measure regarding the infringement of the freedom of establishment as it discriminates against retailers owned by companies from other Member States. 


Davide Anghileri

Davide Anghileri

Researcher and lecturer at University of Lausanne

Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.

Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues.

Davide can be reached at

Davide Anghileri
Davide can be reached at

Don't miss the latest tax and transfer pricing news! Sign up for our FREE newsletter

Be the first to comment

Leave a Reply

Your email address will not be published.