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Brussels, 3 April 2008

Direct taxation: Commission requests Hungary to end discriminative tax incentives for research and development

The European Commission has formally requested Hungary to change its tax law provisions which limit the granting of a tax incentive to taxpayers who engage in research or development activities performed on premises located in Hungary. The provisions are incompatible with the freedom to provide services as guaranteed by Article 49 of the EC Treaty and Article 36 of the EEA Agreement. The request takes the form of a reasoned opinion (second step of the infringement procedure provided for in Article 226 of the EC Treaty). If there is no satisfactory reaction to the Reasoned Opinion within two months, the Commission may decide to refer the matter to the European Court of Justice.

Under Hungarian Law[1], basic research, applied research or experimental development services performed on premises managed by a research institution (research facility) founded by a Hungarian institution of higher education or the Hungarian Academy of Sciences are treated more favourably than similar R&D activities performed on similar premises located in other EU Member States or EEA/EFTA countries.

As a result, these provisions discourage Hungarian companies and entrepreneurs from carrying out their R&D activities in other EU Member States or EEA/EFTA countries and therefore impede the free provision of services as guaranteed by Article 49 of the EC Treaty and Article 36 of the EEA Agreement.

The Commission's opinion is based on the EC Treaty as interpreted by the European Court of Justice in judgment of 10 March 2005 in Case C-39/04, Laboratoires Fournier SA.

The Commission's case reference number is 2007/2017.
For the press releases issued on infringement procedures in the taxation or customs area see:
For the latest general information on infringement measures against Member States see:

[1] Article 7(17) of the Corporate Income Tax and Dividend Tax Act and Article 49/B(6)(cb) of the Personal Income Tax Act

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