Dispute over refinery tax: Czech finance ministry insists there is no risk of retroactivity

The Ministry of Finance rejected Orlen Unipetrol’s view that the proposed windfall tax on refineries is retroactive. Applying the tax to the increase in margins this year is justified by the exceptional and unpredictable geopolitical situation, the ministry said today on its website. In the explanatory memorandum to the proposed law introducing the tax, it also noted that applying the tax in 2026 will prevent tax optimisation, ultimately making it unnecessary to raise the tax rate excessively.

A week ago, the government decided to impose a windfall tax on refineries, applying it this year and next. The tax will be levied on the increase in margins compared with 2025. The government is introducing the sectoral tax in response to rising refining margins caused by disruption to the global oil market.

On Tuesday, Orlen Unipetrol expressed doubts in a press release that the proposed tax is in line with the constitutional order. “The tax is being proposed at the end of the year, with the year’s financial results retroactively serving as the basis for its calculation. This fundamentally changes the economic and tax conditions after investment, commercial and operational decisions have already been made. Such an approach may conflict with the principle of legal certainty and the prohibition of retroactivity, which are among the fundamental principles of a democratic state governed by the rule of law,” said Mariusz Wnuk, CEO and chairman of the board of Orlen Unipetrol.

The Ministry of Finance rejected this interpretation. “The law does not create rights and obligations with retroactive effect. The obligation to pay the tax will arise only after the law enters into force. Economic circumstances arising during 2026 will be used as the basis for establishing and calculating the tax liability after the law takes effect,” it said.

The ministry further states in the explanatory memorandum that refineries had not anticipated this year’s sharp increase in margins in their long-term plans. “Taxable entities could not legitimately have anticipated the unforeseen crisis in the Middle East and subsequent international developments, which resulted in an unreasonably large, sudden increase in their margins,” the document says.

The ministry considers the level of taxation reasonable because only the increase in margins compared with 2025 will be taxed. According to the ministry, the 50 percent tax rate will not have such an impact as to prevent the refineries’ further economic development. The ministry also emphasises that the windfall tax is a deductible expense when calculating corporate income tax.

Orlen Unipetrol also criticised the fact that it is the only company targeted by the windfall tax. The ministry did not respond to this criticism today, referring generally in its materials to the refining sector. However, the refineries in Litvínov and Kralupy nad Vltavou are both owned by Orlen Unipetrol.

The new tax will apply to companies with total annual revenues of at least two billion crowns and annual revenues from refining activities of at least 50 million crowns. It will amount to 50 percent of the increase in gross margins compared with 2025. According to the Ministry of Finance, the government was inspired by a similar tax in Poland. The ministry estimates that revenue from the tax on refinery income earned this year will amount to around 5.5 billion crowns. The bill still needs to be considered by Parliament.