Case C‑323/18
Tesco-Global Áruházak Zrt.
v
Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága
(Request for a preliminary ruling from the Fővárosi Közigazgatási és Munkaügyi Bíróság)
Judgment of the Court (Grand Chamber), 3March 2020
(Reference for a preliminary ruling— Freedom of establishment— Turnover tax in the store retail trade sector— Progressive tax having a greater impact on undertakings owned by natural or legal persons of other Member States than on national undertakings— Progressive tax bands applicable to all taxable persons— Neutrality of the amount of turnover as a criterion of differentiation— Ability to pay of taxable persons)
1.State aid— Planned aid— Examination by the Commission— Respective powers of the Commission and the national courts— Role of the national courts— Safeguarding of the rights of individuals in the event of a breach of the prohibition on implementation— Obligation of the national courts to ensure that appropriate action is taken to address the consequences of that breach in accordance with national law
(Art. 108(2) and (3) TFEU)
(see paragraphs34-35)
2.State aid— Provisions of the Treaty— Scope— Taxes— Excluded other than taxes financing aid— Tax subject to exemptions allegedly constituting aid— Tax not hypothecated to the benefit of an exemption— Not included
(Art. 108(3) TFEU)
(see paragraphs36-40, 42, 43)
3.Freedom of movement for persons— Freedom of establishment— Tax legislation— Corporation tax— National legislation on a turnover tax applied at progressive rates— Whether permissible— Tax having a greater impact on undertakings owned by persons of other Member States than national undertakings— Irrelevant
(Art. 49 and 54 TFEU)
(see paragraphs59, 60, 62, 63, 69, 70, 72, 74, 76, operative part)
Résumé
The special taxes levied in Hungary on the turnover of telecommunications operators and of undertakings in the retail trade sector are compatible with EU law
In the judgments Vodafone Magyarország (C‑75/18) and Tesco-Global Áruházak (C‑323/18), delivered on 3March 2020, the Grand Chamber of the Court held to be compatible with the principle of freedom of establishment and Directive 2006/112(1) (‘the VAT Directive’) the special taxes levied in Hungary on the turnover of telecommunications operators and of undertakings active in the retail trade sector. The fact that those special taxes, the application of which to turnover is progressive (and steeply progressive in the case of the latter), are mainly borne by undertakings owned by persons of other Member States, due to the fact that those undertakings achieve the highest turnover in the Hungarian markets concerned, reflects the economic reality of those markets and does not constitute discrimination against those undertakings. The Court also held that, since the tax imposed on the telecommunications operators does not have all the essential characteristics of VAT, that tax cannot be treated as comparable to VAT, and consequently that tax does not jeopardise the functioning of the VAT system of the European Union and, therefore, is compatible with the VAT Directive.
Since questions were also referred to the Court on the compatibility of the Hungarian legislation introducing those special taxes with the EU rules on State aid, the Court initially gave a ruling on the admissibility of those questions.(2) In that regard, the Court recalled that taxes do not fall within the scope of the provisions of the FEU Treaty concerning State aid unless they constitute the method of financing an aid measure, so that they form an integral part of that measure. For a tax to be regarded as forming an integral part of an aid measure, it must be hypothecated to the aid measure under the relevant national rules. In this case, the Court found, however, that the applications for exemption from the special taxes submitted by the applicant companies to the Hungarian tax authorities concern general taxes, the revenue from which is transferred to the State budget, those taxes not being specifically allocated to the funding of a tax advantage for which a particular category of taxable persons qualify. The Court concluded that the special taxes imposed on those applicant companies are not hypothecated to the exemption for which some taxable persons qualify, and consequently any illegality under EU rules relating to State aid of such an exemption is not capable of affecting the legality of those special taxes themselves. Accordingly, the applicant companies cannot rely, before the national courts, on that possible unlawfulness in order to avoid payment of those taxes.
Next, the Court examined whether the Hungarian legislation enacting the special taxes at issue constitutes discrimination based on where companies have their registered office, which is prohibited by the provisions of the FEU Treaty on freedom of establishment. In that regard, the Court, first, found that the parent companies of the applicants have their registered offices in the United Kingdom and in the Netherlands respectively, and that, since those parent companies conduct business in the Hungarian market through subsidiaries, their freedom of establishment may be affected by any restriction that affects those subsidiaries. The Court referred to its case-law on the prohibition of direct and indirect discrimination and then held that, in this case, the special taxes at issue make no distinction according to where companies have their registered office.
In that context, the Court stated, in the first place, that, since all the undertakings active in Hungary in the sectors concerned are liable to pay the taxes at issue and since the rates of taxation respectively applicable to the various bands of turnover apply to all those undertakings, the Hungarian legislation enacting those taxes does not establish any direct discrimination against undertakings owned by persons (natural or legal) of other Member States.
The Court, in the second place, determined whether the fact that the special taxes are (steeply) progressive may be considered to be a source of indirect discrimination against the latter undertakings.
In that regard, the Court found that, in relation to the tax years at issue, namely those covering the period from 1April 2011 to 31March 2015 in the Vodafone case and that from 1March 2010 to 28February 2013 in the Tesco case, the taxable persons that fell only within the base tax band, charged at 0%, were all taxable persons owned by Hungarian persons, whereas those falling within the higher tax bands were predominantly taxable persons owned by persons of other Member States. Accordingly, the greater part of the special tax was borne by taxable persons owned by persons of other Member States.
The Court recalled, however, that the Member States are free to establish the system of taxation that they deem the most appropriate and to establish progressive taxation on turnover, since the amount of turnover constitutes a criterion of differentiation that is neutral and a relevant indicator of a taxable person’s ability to pay. In that context, the fact that the greater part of the special taxes at issue is borne by taxable persons owned by natural persons or legal persons of other Member States cannot be sufficient ground for the conclusion that there is discrimination against them. That situation is due to the fact that the markets concerned in the present cases are dominated by such taxable persons, who achieve the highest turnover in those markets. That situation is, accordingly, an indicator that is fortuitous, if not a matter of chance, which may arise whenever the market concerned is dominated by undertakings of other Member States or of non-Member States or by national undertakings owned by persons of other Member States or of non-Member States. Moreover, the basic band of tax charged at 0% does not exclusively affect taxable persons owned by Hungarian persons, since any undertaking operating on the market concerned has the benefit of the reduction for the proportion of its turnover that does not exceed the maximum amount of that band. Consequently, the (steeply) progressive rates of the special taxes at issue do not, inherently, create any discrimination, based on where companies have their registered office, between taxable persons owned by Hungarian persons and taxable persons owned by persons of other Member States.
Further, in the judgment in Case C‑75/18, a question was referred to the Court on the compatibility of the introduction of the special tax on the turnover of telecommunications operators with the VAT Directive.(3) In that regard, the Court stated that it is necessary, in particular, to determine whether the tax in question has the effect of jeopardising the functioning of the common system of value added tax (VAT) by being levied on the movement of goods and services and on commercial transactions in a way comparable to VAT, which is the case when, inter alia, taxes have the essential characteristics of VAT. The Court found, however, that the Hungarian legislation enacting the special tax at issue does not provide for the charging of the tax at each stage of the production and distribution process or a right to deduction of the tax paid during the preceding stages of that process. Accordingly, since two of the four essential characteristics laid down by the Court in its earlier case-law are not met by the special tax concerned, the VAT Directive does not preclude the introduction of that tax.
1Council Directive 2006/112/EC of 28November 2006 on the common system of value added tax (OJ 2006 L347, p.1).
2In 2019, the General Court annulled two decisions of the Commission that classified as State aid the Polish tax in the retail sector and the Hungarian advertisement tax (judgment of the General Court of 16May 2019, Poland v Commission (Joined Cases T‑836/16 and T‑624/17, Press Release 64/19), and judgment of the General Court of 27June 2019, Hungary v Commission (T‑20/17, Press Release 84/19)). Those judgments are subject to appeal before the Court (C‑562/19P and C‑596/19P).
3Article 401.