Blog » HUNGARIAN TAX ON FOREIGN MOTOR VEICHLES TO BREACH EU LAW
HUNGARIAN TAX ON FOREIGN MOTOR VEICHLES TO BREACH EU LAW
30 November 2017
Just 10 years ago, the Hungarian registration tax case was brought before the European Court of Justice, where the national tax on second-hand cars imported from abroad has failed in Luxembourg. Hungary has no luck with taxes on foreign cars because in its recent judgement the EU Court has found that the Hungarian car tax also breaches EU law. The judgment will make happy rather international forwarding companies than Hungarian motorists, because the decision only applies to vehicles registered abroad, and passing through Hungary.
The background of the case
Istanbul Lojistik is a Turkish company which carries goods by road from Turkey to the EU. One of the company's lorries transported textile goods from Turkey to Germany in March 2015, but after a road check, the Hungarian tax authority found that the car tax was not paid in respect of this lorry.
For this reason, the Hungarian tax authority obliged the Turkish company to pay the car tax and imposed a penalty, amounting to ten times the amount of car tax.
The Turkish company brought an action for review of the administrative decision in front of the Hungarian court on the grounds, that the provisions of the Law on Motor Vehicles Tax infringed the EU-Turkey Association Agreement. In the latter Agreement, the contracting Parties - the European Economic Community and Turkey - established a customs union.
According to the company’s point of view, the tax imposed on motor vehicles registered in third countries which pass through Hungary as a transit state constitutes a charge having equivalent effect to a customs duty and therefore constitutes a restriction on the free movement of goods contrary to European Union law.
The Hungarian court suspended the procedure and asked the European Court of Justice for a preliminary decision on interpretation of EU law.
The ECJ - in accordance with its well settled case law - stated that, whatever its designation, mode of application or amount, any pecuniary charge which is imposed unilaterally on goods that cross a border and which is not a customs duty in the strict sense, constitutes a charge having equivalent effect to a customs duty.
In view of the fact that the parties agreed on a customs union in the EEC-Turkey Association Agreement, it is forbidden to levy customs or charges having equivalent effect.
However, the Hungarian law on motor vehicles tax treats differently the vehicles registered in Hungary and vehicles registered in Turkey, and the latter have to pay the tax at each entry to Hungary, which significantly undermines the competitiveness of Turkish carriers and is therefore contrary to the objectives of the Association Agreement.
Based on the above, the European Court of Justice stated in its judgement on the 19th October 2017 that the Hungarian motor vehicle tax constitutes a charge having equivalent effect to a customs duty and as such it is against the EU law.
Another interesting update in relation to the case is that according to an article published by a Turkish newspaper, nearly 100 Turkish lorries are stuck at the Hungarian border after the decision, so apparently the judgement of the European Court of Justice reached the Hungarian authorities unexpectedly.
CORONAVIRUS: GOVERNMENTAL MEASURES PROTECTING COMMERCIAL LESSEES IN HUNGARY
The worldwide coronavirus epidemic is causing serious problems in the economy as well, businesses in sensitive sectors fear a total loss of income for months. For this reason, the Hungarian Government introduced a ban on termination and rent increase for commercial lease contract in case the lessee operates in specific, sensitive sectors. However, there are several legal uncertainties surrounding the measure, which will be discussed in our brief article.Read more »
HUNGARY: CHOICE OF LAW BY CONDUCT IN LITIGATION? – JUDGMENT OF SUPREME COURT
Can the conduct of the parties during litigation amount to an implied choice-of-law agreement based on the Rome I Regulation? We analyse the fresh judgment of the Hungarian Supreme Court in this article.Read more »
LABOUR LAW CHANGES DURING THE CORONAVIRUS EPIDEMIC – 4 MEANS AVAILABLE FOR HUNGARIAN EMPLOYERS
The coronavirus is already having its unfortunate impacts in the whole world and there is almost no sector which has not been rocked by the effects of the virus. In this rather difficult situation, it is questionable for the employer how to manage their resources and how to protect their employees. The decree of the government effective from 19th March 2020 gives certain tools to the employers which may help them to optimize their operations and to defend their employees. In our short article we summarize these measures.Read more »