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Hungary: Advertisement tax not state aid, concluded EU General Court

Hungary: Advertisement tax not state aid

The General Court of the European Union today issued a judgment rejecting the European Commission’s decision finding that the Hungarian advertisement tax was incompatible with the EU state aid rules.

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According to a court release [PDF 216 KB], it was concluded that neither that tax’s progressivity, nor the possibility for undertakings not making a profit in 2013 to deduct from the 2014 basis of assessment for that tax losses carried forward from the earlier financial years, constituted a selective advantage in favor of certain undertakings.

Overview

In 2014, Hungary introduced an advertisement tax as a special tax applied on turnover derived from the broadcasting or publication of advertisements in Hungary.

Newspapers, audiovisual media and bill-posters are subject to the tax, and the amount subject to the tax is the net turnover for the financial year generated by the broadcasting or publication of advertisements, to which progressive rates ranging from 0% to 50% per bracket of turnover are applied. Subsequently, Hungary replaced that set of six progressive rates by a set comprising two rates—a 0% rate for the part of the taxable amount below HUF 100 million (approximately €312 000) and a second rate, of 5.3%, for the part of the taxable amount above that figure.

Taxable persons subject to advertisement tax whose pre-tax profits for the financial year 2013 were zero or negative could deduct, from their 2014 taxable amount for that tax, 50% of the losses carried forward from the earlier financial years.

The European Commission in November 2016 found that the tax system relating to the advertisement tax (the progressive tax rates and provisions prescribing a reduction in that tax in the form of deduction of losses carried forward for undertakings that were not profit making in 2013) constituted a state aid measure incompatible with the internal market.

The General Court today issued a judgment that, for the same reasons as those set out in its recent judgment concerning the Polish tax on the retail sector, the EC was not entitled to infer that there were selective advantages constituting state aid solely from the progressive structure of the advertisement tax.

 

Read a July 2019 report prepared by the KPMG member firm in Hungary

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