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ECJ Rules Against Hungarian Alcohol Duty Exemption

by Ulrika Lomas, Tax-News.com, Brussels

16 April 2014


The European Court of Justice (ECJ) has ruled that Hungarian excise duty exemptions applying to the private production of small quantities of alcoholic spirits go beyond what is permitted under European law.

Hungary says it introduced the exemptions "to preserve a national tradition" of producing pálinka, a traditional fruit brandy. Under the country's tax rules, up to 50 liters per year of spirits manufactured in a distillery on behalf of a fruit grower are given a zero excise rate, and there is an exemption for spirits manufactured up to the same quantity by a private person in their own distillery for personal consumption.

The ECJ said that Hungary was authorized to impose a preferential rate for up to 50 litres of alcohol per year per fruit-grower's household, but that this had to be within the scope of EU legislation. Under EU law, the main rate of excise duty for alcoholic beverages other than wine and beer must be at least EUR550 (USD760) per hectoliter of pure alcohol, and a preferential rate must be at least 50 percent of the main rate. The court added that there is no provision in EU law for exempting spirits manufactured by private individuals from excise duty.

In response, Hungary's Government said it would initiate consultations with the European Commission to ensure compliance with the EU regulatory framework, but that it remains committed to upholding the "living tradition of home-made pálinka."

TAGS: individuals | court | compliance | tax | European Commission | Hungary | law | excise duty | legislation | tax rates | European Union (EU) | Europe

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