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Brussels, 29 October 2009

Car taxation: The European Commission calls on Hungary to change its legislation on car registration tax

The European Commission has called on Hungary, through a reasoned opinion under Article 226 of the Treaty, to modify its relevant provisions on car registration tax, which provide for the depreciation of value to be applied to second-hand passenger vehicles from other Member States in the determination of their taxable value. Despite some modifications in the law, the Hungarian car tax legislation continues to discriminate against the acquisition of second-hand cars from other Member States. If Hungary fails to comply with the reasoned opinion, the Commission may bring the matter to the European Court of Justice (ECJ).

The ECJ has consistently held that a Member State is not prohibited from levying a vehicle tax on the first registration of a motor vehicle in that Member State 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 taxation on the products of other Member States that is in excess of that imposed on similar domestic products.

Member States may apply flat-rate scales for the purpose of establishing the taxable value of a second-hand vehicle from another Member State. However, such scales must lead to a value that reflects, as a general rule, their actual value. In that respect, the Court also allowed for reasonable approximations in the system.

In its judgement in Case C-290/05, the Court has already held that certain provisions of the Hungarian legislation on registration tax, in its version in force between 1 May 2004 and 31 December 2005, were contrary to Article 90 of the EC Treaty, in that the tax was calculated without taking into account the true depreciation of second-hand vehicles. In that way, the tax applied to second-hand vehicles from other Member States exceeded the residual tax incorporated in the value of similar used vehicles already registered in Hungary.

Hungary has modified the depreciation scales to comply with the above judgment, but such scales are still based on a single criterion of depreciation (the age of the vehicle) which was criticised in a recent judgment in Case C-74/06. While Hungary contends that the depreciation scales were established on the basis of average values of used prices taken from catalogues, and in that sense the system takes account of multiple criteria, including the mileage of the cars, the Commission considers that a system of average values cannot, by definition, ensure compliance with the requirements set out in ECJ case-law. The consequence of that system will be that all used cars from other Member States whose value has depreciated more than average will be taxed higher than similar Hungarian vehicles.

With a view to checking that the Hungarian depreciation scales lead in practice to a value of second-hand cars which is very close their actual value, the Commission has analysed used cars which are offered for sale on the Hungarian market, similar to those likely to be imported into Hungary. The analysis has revealed that, in the majority of cases, the legal depreciation scales lead to a higher used value of such cars than their actual used value corresponding to the price requested for the used vehicle.

Hungary has also introduced, following the judgment in Case C-290/05, the individual tax assessment procedure which provides the importer with the option of requesting a case-by-case assessment of the car registration tax of his vehicle, taking account of its individual features.

However, the fact that Hungary has appointed only one technical authority in a remote part of the country to treat applications from all over the country, and the fact that there is a fee and increased duration of the procedure for levying the registration tax, may deter certain car owners from applying for individual tax assessment, which amounts to a violation of Community law.

For information on EU activities in the field of car taxation see:

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:

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