The Court of Justice of the European Union has asked Budapest to review its advertising tax in order to change the penalty system, which it considers to be much stricter for advertising service providers established in another Member State than for Hungarian companies. This is the result of a judgment delivered on Tuesday 3 March in a case involving Google Ireland Limited (case C-482/18).
The Hungarian regulations impose reporting requirements on foreign advertising companies for the purpose of determining their liability under the Hungarian advertising tax, while providing for an exemption for Hungarian companies making other declarations in the context of other domestic taxes.
While the Court does not consider this dual regime to be problematic, the penalty regime for failure to comply is. The Commission considers that Hungarian law allows fines to be imposed on foreign companies at a significantly higher rate than on companies based in Hungary. Moreover, it notes that neither the amounts nor the time limits of the latter scheme are as strict as those applicable under the penalties provided for in the Advertising Tax Act. In the case in the main proceedings, Google Ireland was penalised by a penalty increasing, within a few days, from €31,000 to €3.1 million (the maximum amount provided for by Hungarian law).
In conclusion, the Court considers that this difference in treatment, which it judges “disproportionate and therefore not justified”, constitutes a restriction on the freedom to provide services prohibited by Article 56 TFEU. (Original version in French by Sophie Petitjean)