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Court of Justice: Hungarian voucher system incompatible with EU law

The European Court of Justice ruled today that elements of the SZÉP leisure card and Erzsébet food-voucher systems, which enable Hungarian employers to offer their employees reduced tax benefits as part of Hungary’s unified voucher system, conflict with EU law, the court said in a press release yesterday.

According to Hungarian tax legislation, employers may provide

vouchers or cards to their employees under favorable tax conditions. Employees may then use these vouchers or cards to obtain a number of goods and services, by circumventing the additional payments to third parties from which these goods and services are purchased.


The five main points of the judgment are as follows:

- the fact that Hungarian branches of companies established in other EU Member States cannot issue SZÉP cards;


- the requirement that, in certain circumstances, SZÉP card issuers take the form of a Hungarian subsidiary of a parent company incorporated under Hungarian law, as such their registered place of business must be in Hungary;


- the fact that only financial institutions whose registered place of business is in Hungary are able to fulfil the conditions required of SZÉP card issuers to have a customer service office in all Hungarian municipalities with a population of more than 35,000;


- that the above requirement deprives service providers with a registered place of business in other Member States of their right to provide cross-border services without establishing their place of business in Hungary;


- that the issuing of such vouchers is deemed an economic activity and that the monopoly granted the Magyar Nemzeti Üdülési Alapítvány (Hungarian National Foundation for Recreation, “HNFR”) with regard to this activity constitutes a restriction of both the freedom of establishment and the freedom to provide services.