Public land transport enables citizens, especially those without a car, to travel to places of work, education or leisure. It is, therefore, essential to fulfil society’s social, economic and cultural needs. It is also vital for implementing the European climate policy. However, many transport services are unprofitable. They can only be performed by establishing a Public Service Obligation and compensation for their provision. These issues are regulated by EU law. In practice, however, they raise many doubts. In particular, it is unclear whether the compensation must cover all the operator’s costs (the total net cost of performing the service) and whether the restrictive methods for calculating compensation (specified in the annexe to Regulation 1370/2007) should always (in every case) be applied. The aim of this article is to answer these questions based on the latest rulings of the CJEU. Moreover, the article aims to explain whether the provisions of Polish law regulating the issue of compensation are in line with EU law.