Car taxation: infringement procedure against Hungary - Main contents

The Commission has decided to send Hungary a formal request for information concerning the taxation rules that Hungary applies on the registration of second-hand cars brought into Hungary from other EU Member States. The rules are applied in a way that may breach the EC Treaty provisions on equal treatment of domestic products and those of other Member States. The request to Hungary is in the form of a "letter of formal notice", the first stage of the infringement procedure laid down in Article 226 of the EC Treaty. If the Commission does not receive satisfactory responses from the Member State, it may proceed with the second stage of the said procedure and ultimately bring the case before the Court of Justice.

"Member States are free to introduce and also to increase the level of registration taxes on motor vehicles" said EU Taxation and Customs Commissioner László Kovács i. "But they must respect the Treaty principle of non-discrimination between domestic and EU products as well as secondary community law".

Under Hungarian law, a car is subject to a registration tax on its first entry into use in Hungary. The tax is applicable to new and to second hand cars alike, with its level depending only on the engine capacity, type of fuel used and emission standards. The Hungarian registration tax does not, in other words, take account of the real wear and tear undergone by the vehicle.

The European Court of Justice (ECJ) has consistently held that a Member State is not prohibited from levying a vehicle tax such as one on the first registration of a vehicle in that Member State but provided that the tax is in conformity with Article 90 of the EC Treaty. This means that a Member State must not impose any internal tax, directly or indirectly, on the products of other Member States of a kind in excess of that imposed directly or indirectly on similar domestic products. The ECJ has declared that Article 90 requires a Member State to take an imported second-hand vehicle's actual depreciation into account in calculating registration tax. Otherwise the tax imposed would exceed the residual tax incorporated in the value of similar second-hand motor vehicles already registered in the national territory (see ECJ cases Nunes Tadeu, C-345/93; Commission v Denmark, C-47/88; and Commission v Hellenic Republic, C-375/95).

Hungary also applies a surcharge of 25% on top of the registration tax in the case of the intra-community acquisition of second-hand cars. The charge applies to all vehicles from other Member States other than those registered in Hungary when new. According to the case law of the ECJ, a criterion for charging higher taxation which by definition will never be fulfilled by similar domestic products cannot be considered to be compatible with the prohibition on discrimination laid down in Article 90 EC. Such a system has the effect of excluding domestic products from heavier taxation.

For information on EU activities in the field of car taxation see http://europa.eu.int/comm/taxation_customs/taxation/other_taxes/passenger_car/index_en.htm
The latest information on infringement procedures concerning all Member States can be found at the following site: http://europa.eu.int/comm/secretariat_general/sgb/droit_com/index_en.htm