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ECJ rules Hungary VAT legislation too extreme

Issues

Hungary’s national legislation on VAT goes beyond what is necessary to prevent tax evasion and tax avoidance when it denies exemption to exporters only because they missed a deadline, the European Court of Justice (ECJ) declared in a ruling published today.

The ruling was made in a dispute between BVD Hungary Trading, a canned food wholesaler being wound up, and the National Tax and Customs Authority (NAV)

NAV had levied a fine and a late payment penalty on the company which the latter disputed, arguing that although the products in question had left at a later date, the sanctions of the tax authority were disproportionate and contradicted European Union regulations.

The relevant EU Council Directive “on the common system of value added tax must be interpreted as precluding national legislation under which, in the context of a supply for export, goods intended to be exported from the European Union must have left the territory of the European Union within a fixed period of three months or 90 days following the date of supply, where merely exceeding that time-limit results in the definitive loss for the taxable person of the right to exemption in relation to that supply,” the European Court said.

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