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EU: Implications of EU General Court judgments, Hungarian advertisement tax and Polish retail tax

EU: Implications of EU General Court judgments

The General Court of the European Union on 27 June 2019 annulled the European Commission's decision that a Hungarian advertisement tax was incompatible with EU state aid rules.

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The General Court concluded that the EC had failed to prove that Hungary’s advertisement tax and the tax’s selective advantages constituted unlawful state aid solely on grounds of the progressive structure of the tax. Furthermore, the General Court considered that the rules on the use of loss carryforwards in the advertisement tax system were not selective in that regard.

Read TaxNewsFlash

Polish retail tax

The judgment concerning Hungary’s advertisement tax is the second (and similar) judgement of the General Court since in May 2019 when it annulled the EC’s decisions on a retail tax in Poland.

Poland in 2016 introduced a surtax with highly progressive tax rates on retail companies with monthly net sales revenue of over PLN 17 million (about €4 million), and the basis of the tax was net sales revenue. The EC found that—similar to the Hungarian advertisement tax—the Polish retail tax, due to its progressive nature, constituted state aid that was incompatible with the internal market, and ordered the suspension of the application of the tax. The General Court in May 2019 found that the EC had not correctly assessed the selective nature of the retail tax solely on the basis of its progressive structure, and that the EC was unable to establish the existence of a selective advantage that would adversely differentiate between the affected entities. Thus, the EC’s decision classifying the Polish retail tax as state aid was annulled. Read TaxNewsFlash

Possible implications for other proceedings

In view of these two judgments of the General Court, there is a question as to how these may affect earlier decisions of the EC in similar cases, such as those establishing prohibited state aid regarding the health contribution of tobacco industry businesses or food chain inspection fee.

There also may be questions whether these judgments may affect the preliminary ruling proceedings currently ongoing before the EC related to the Hungarian sector-specific surtax (effective between 2010 and 2012) as well as other state aid considerations.

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