• Service: Tax, Global Indirect Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 9/6/2013

Hungary - Special tax imposed on retail trade 

September 6: The Advocate General of the Court of Justice of the European Union (CJEU) issued an opinion concluding that the Hungarian special tax imposed on retail trade does not discriminate against foreign undertakings, but may infringe on EU value added tax (VAT) rules. Hervis Sport, C-385/12 (5 September 2013)

Read the CJEU release [PDF 117 KB]


The Hungarian tax on specific retail activities (introduced in 2010 to address financial needs from the financial and economic crisis) is imposed at rates ranging from 0.1% to 2.5%, and is assessed on the basis of a retailer’s annual turnover.

Concerning “undertakings,” the tax is applied not on annual turnover of the undertaking, but on the total turnover of all related undertakings.

A Hungarian sports equipment retailer that was part of an Austrian group of companies (also involved in food retail) asserted the tax was contrary to EU law. In calculating its tax liability, with the group’s total turnover in Hungary taken into account, the tax rate applied to the Hungarian retailer was much higher than it would have been had only its own turnover been considered.

The Hungarian retailer claimed that in the food retailing sector, it is mainly foreign-owned undertakings that are affected by the special tax, and that while they are organized in a company group structure, Hungarian proprietors employ the franchise model so that only each individual franchisee’s turnover is relevant.

Pending before CJEU

The Hungarian court asked the CJEU about the compatibility of the special tax with EU law.

The CJEU Advocate General’s opinion (5 September 2013) concludes that EU law prohibitions on discrimination and the fundamental freedoms (in particular, the freedom of establishment) do not preclude a tax such as the Hungarian special tax.

However, the Advocate General pointed out that the Hungarian special tax may infringe the VAT Directive, which prohibits EU Member States from levying taxes that can be characterized as turnover taxes. Thus, it was stated that the Hungarian court must examine whether the special tax is compatible with the VAT Directive.

KPMG observation

The Advocate General’s opinion is not binding on the CJEU. Now that the opinion has been issued, the CJEU judges can begin deliberations in this case, with judgment to be given at a later date.

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