ADVERTISEMENT

ECJ rules Hungary’s tax on retailers discriminatory

Banking

The European Court of Justice on Wednesday ruled that Hungary's sectoral tax on retailers is discriminatory, putting companies with owners in other European Union states at a disadvantage. The ruling came in a case filed by the Székesfehérvár-based franchise of sporting goods retailer Hervis against the National Tax Authority (NAV) which argued companies must pay the tax based on consolidated turnover, which raises the rate for large-- often foreign-owned – corporate groups.

In its ruling, the ECJ noted that combining the turnover of chain stores with the purpose of applying a progressive tax rate went against the Treaty on the Functioning of the European Union (TFEU), if the persons taxable for the turnover have their office in another member state.

“Articles 49 TFEU and 54 TFEU must be interpreted as precluding legislation of a member state relating to tax on the turnover of store retail trade which obliges taxable legal persons constituting, within a group, ‘linked undertakings’ within the meaning of that legislation, to aggregate their turnover for the purpose of the application of a steeply progressive rate, and then to divide the resulting amount of tax among them in proportion to their actual turnover, if … the taxable persons covered by the highest band of the special tax are ‘linked’, in the majority of cases, to companies which have their registered office in another member state,” reads the decision in part.

In September 2013, ECJ advocate-general Juliane Kokott in an official opinion on Hervis’s complaint stated that the sector tax enacted in 2010 may be in violation of certain VAT directives. While “the Hungarian special tax applicable to the retail trade does not discriminate against foreign undertakings,” Kokott wrote at that time, the special tax may nevertheless infringe upon standing EU regulations.

Hungary-based retailers with annual revenue of over HUF 500 million are required to pay 0.1% to 2.5% in additional tax, based on revenue; only those enterprises with turnover exceeding HUF 100 billion are required to pay this top rate, a structure legal representation for Hervis argued was retrogressive.

-- material from national news service MTI was used in this article

ADVERTISEMENT

IMF raises Hungary 2021 GDP growth forecast to 7.6% Analysis

IMF raises Hungary 2021 GDP growth forecast to 7.6%

Parliament approves amendment to Competition Act Parliament

Parliament approves amendment to Competition Act

New CEO announced at Codic Hungary Appointments

New CEO announced at Codic Hungary

Budapest bike-sharing scheme boasts record ridership City

Budapest bike-sharing scheme boasts record ridership

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.