European Commission reviews VAT cut on fuel in Poland — RMF24
The European Commission is reviewing new Polish rules providing for a temporary reduction of VAT on petrol and diesel fuel from 23% to 8%. The reduced rate has been in effect in Poland since October 3 and is to apply until the end of December, RMF24 reports.
European Commission’s position
European Commission spokesperson for taxation Luisa Borgei said that EU legislation in this area has not changed. According to her, the VAT Directive does not provide for the application of reduced rates to fossil fuels, including petrol and diesel.
Brussels already drew Poland’s attention to this in March, when the country first reduced VAT on fuel as part of the “Lower Fuel Prices” programme. At that time, the European Commission sent an official warning to Warsaw, as well as to Madrid, which had applied a similar measure. This was not the formal start of proceedings over a breach of EU law.
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Poland’s arguments and possible actions
In April, the Polish authorities told the European Commission that the measure was temporary and exceptional. Warsaw explained the tax cut by its intention to curb price growth caused by the armed conflict in the Middle East. The Polish side also noted that more expensive fuel increases transport and production costs, affecting the prices of goods and services.
Spain abolished its temporary VAT reduction at the end of June and now applies a lower excise duty on fuel. According to the European Commission, it has no information about other EU member states, apart from Poland, that currently apply a reduced VAT rate to fossil fuels.
The Commission has not yet decided on further action. It recalled that the 2022 reform of VAT rates gave EU member states greater flexibility regarding reduced rates for goods and services linked to social, health or environmental objectives. At the same time, this flexibility does not apply to petrol and diesel. The European Commission also believes that a VAT reduction does not necessarily fully affect the price paid by drivers.
