Hungary: ECJ investigates EU compliance of Hungarian registration tax

Buyers of imported second-hand cars may receive a partial refund of the registration tax they paid when bringing the car into Hungary.

Between 1 May 2004 and 31 December 2005, registration tax applied to new and used vehicles alike. The level of tax depended on the engine capacity, type of fuel used and emission standards but not the vehicle’s depreciation. This meant that the tax levied on used cars imported during this period was higher than the residual tax payable for equivalent used cars of Hungarian origin.

EU law prohibits member states from taxing products from other member states differently from similar domestic products. The Advocate General has now given an opinion that Hungarian registration tax is incompatible with Article 90 of the EC Treaty and the final decision of the ECJ is expected in a few months’ time. If it follows the Advocate General’s opinion, imported used car buyers submitting their tax return to the Hungarian tax authorities will be able to claim back the difference between the registration tax they paid and the tax payable on cars of Hungarian origin.

Although registration tax levied since January 2006 now takes account of depreciation, its method of calculation is very similar to the Portuguese model which has also been challenged before the ECJ.