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IP/09/1657

Brussels, 30 th October 2009

State aid: Commission closes investigation into Hungarian intra-group interest taxation

The European Commission has closed a formal investigation under EC Treaty state aid rules into a Hungarian tax scheme, which provided for interest deduction for companies belonging to one corporate group. The investigation was opened in March 2007 (see IP/07/375 ). The Commission had concerns that the measure was liable to distort competition in the Single Market, as it was not open to all companies in Hungary and therefore could amount to state aid. However, as the measure was introduced before Hungary's EU accession in May 2004 and its state aid character was not immediately clear, the Commission concluded that the measure was to be classified as existing aid. The Commission does not need to open a separate procedure for existing aid (which is subject to a different set of rules) as Hungary has in the meantime adopted a law repealing the measure as of 1 st January 2010.

In January 2003, the Hungarian authorities introduced new provisions regarding favourable taxation of net interest income received from affiliated companies belonging to one corporate group. The measure allowed a tax deduction of 50% of the amount of the net interest received from affiliated companies with the result that only half of the interest would be taxed. Conversely, at the level of the affiliated company paying the interest, 50% of the amount of the net interest paid would be added to the tax base, therefore leading to higher taxation for the affiliated company.

In February 2007, the Commission opened an in-depth investigation due to concerns that the measure would give a selective advantage to certain companies (see IP/07/375 ).

Following comments submitted by third parties, the Commission concluded that the interest deduction measure constituted state aid, as it excluded from its scope several sectors (e.g. the financial sector) and certain types of companies (small companies).

However, due to the fact that the measure was introduced before Hungary's EU accession, as well as uncertainties regarding the qualification of the scheme as aid at the time of its introduction, the Commission concluded that the scheme constituted existing aid which is generally assessed under a specific set of rules known as the cooperation procedure (and does not entail recovery of the aid granted). However, as Hungary has already adopted a law repealing the scheme from 1 st January 2010, there is no need to open the cooperation procedure.

The non-confidential version of the decision will be made available under the case number C 10/2007 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News .


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