EU court: Sanctions regime on Hungarian ad tax incompatible with EU law

The sanctions regime in connection with Hungary’s advertising tax is incompatible with EU law, the Luxembourg court ruled in a case concerning Google.

In January 2017, Hungary’s tax authority (NAV) fined Dublin-based Google Ireland for failing to register with the authorities regarding the advertising tax system.

The law states that a first offence carries a fine of ten million forints (EUR 30,000) followed by a daily fine of three times the previous amount, capped at 1 billion forints (3 million euros).

Google first took its case to the Metropolitan Court of Administration and Labour, claiming the law was discriminatory and breached the EU principle of freedom to provide services.

The EU Court of Justice agreed that a state can levy a tax on a company from another EU member state without breaching the principle of freedom to provide services under EU law, but it took issue with the daily imposition of successive fines, and the cumulative amount reaching millions of euros, without giving the company time to comply with their obligations.