Direct Taxation: The European Commission refers Hungary to the Court of Justice over discriminatory tax provisions concerning the duty levied on the purchase of residential property - Main contents

The European Commission has decided to refer Hungary to the European Court of Justice for its provisions concerning the duty levied on the purchase of residential property. Those provisions discriminate against taxpayers whose purchase is preceded or followed by the sale of their previous home in another Member State. The provisions are therefore incompatible with the free movement of persons and the freedom of establishment, as guaranteed by Articles 18, 39 and 43 of the EC Treaty and the corresponding articles of the EEA agreement.

Under Hungarian law^[1], a person buying a house in Hungary must pay a duty (in Hungarian visszterhes vagyonátruházási illeték) which is calculated as a percentage of the value of the property. Where the property is the taxpayer's home and the purchase is preceded or followed by the sale of his previous home in Hungary, the duty is levied only if and to the extent that the value of the newly acquired property exceeds that of the one sold.

On the other hand, where the purchase of a taxpayer's home in Hungary is preceded or followed by the sale of his previous home in another Member State, the duty will be calculated as a percentage of the value of the property purchased irrespective of the value of his previous home.

As a result, people who move to Hungary and sell their homes in other Member States will be treated less favourably compared to Hungarian residents buying a new dwelling to replace their current one situated in Hungary. The Commission considers that such persons may be in the same situation as Hungarian residents, by reason of the fact that they may have paid a duty comparable to the Hungarian one when buying a dwelling abroad.

Therefore, the Commission considers that the Hungarian rules in question pose a restriction on the right of every citizen of the European Union to move and reside freely within the territory of the Member States (Article 18 of the EC Treaty) and, more specifically, infringe the right of free movement of workers (Article 39 of the EC Treaty) and the freedom of establishment (Article 43 of the EC Treaty).

Given that the above Hungarian tax rules were not amended to comply with the Reasoned Opinion sent to Hungary on 26 June 2008 (IP/08/1020), the Commission has decided to refer this case to the Court of Justice.

The Commission's case reference number is 2007/4016.

For the press releases issued on infringement procedures in the taxation or customs area see:

http://ec.europa.eu/taxation_customs/common/infringements/infringement_cases/index_en.htm

For the latest general information on infringement measures against Member States see:

http://ec.europa.eu/community_law/infringements/infringements_en.htm

^[1] Article 21(5) of the Act no. XCIII of 1990 on Duties