The European Commission finds Hungary ad tax in breach of EU rules

Budapest, November 4 (MTI) – The European Commission on Friday said it found that a Hungarian tax on advertising is incompatible with European Union rules and ordered the country to recover taxes from companies that enjoyed an unfair advantage.

The EC said the tax is in breach of EU state aid rules because its progressive tax rates grant selective advantage to certain companies. The tax also unduly favours companies that did not make a profit in 2013 by allowing them a tax preference, it added.

Hungary introduced the progressive tax, with rates ranging from 0 percent to 50 percent, in June 2014. The EC launched an in-depth investigation into the matter in March 2015 and asked Hungary to suspend the application of the tax.

The EC noted on Friday that Hungary suspended the tax but still implemented an amended version, without notifying or consulting with the EC.

The EC acknowledged that the amended ad tax, in force from July 2015, was a move “in the right direction” but said it maintained progressive rates, albeit over a smaller range of 0-5.3 percent, and “did not fully address the Commission’s concerns”. The limitations on past losses also remained unchanged, it added.

The decision requires Hungary to remove the unjustified discrimination from the tax rules and restore equal treatment in the market, the EC said. The precise amounts of tax to be recovered from each company, if any, must be determined by the Hungarian authorities based on a methodology established in the EC’s decision, it added.

Source: MTI