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
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