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Hungary Wrong To Tax Turkish EU-Bound HGVs, ECJ Rules

by Ulrika Lomas, Tax-News.com, Brussels

19 October 2017


The European Court of Justice has ruled against Hungarian tax authorities in their decision to levy a tax on a Turkish haulage company transporting goods by road from Turkey to the European Union.

In March 2015, the Hungarian tax authorities found that the Hungarian tax on motor vehicles had not been paid in respect of a heavy goods vehicle belonging to the company that had been transporting textiles from Turkey to Germany. It ordered the company to pay an amount equivalent to EUR200 and a penalty of about EUR2,000.

The company challenged the assessment arguing that the tax in question constitutes a charge having the equivalent effect of a customs duty, the imposition of which, in respect of trade in goods between the EU and Turkey, is prohibited by the implementation provisions of the Ankara Agreement, which provides that customs duties and charges having equivalent effect to such duties are abolished between the EU and Turkey.

In its October 19 judgment in favor of the taxpayer in Istanbul Lojistik Ltd v. Hungarian Tax and Customs Directorate (Case C-65/16), the Court had noted that, whatever its designation, mode of application, or amount, any pecuniary charge that is imposed unilaterally on goods that cross a frontier and which is not a customs duty in the strict sense constitutes a charge having equivalent effect to a customs duty.

The Court also observed that a charge that is triggered by the carriage of goods and is imposed not on a product as such, but on a necessary service in connection with the product, may also be made subject to the requirements stemming from the principle of free movement of goods. In that respect, the Court noted that the amount of tax concerned depends on criteria that are linked, inter alia, to the quantity of goods that can be carried and to their destination. Accordingly, the Court found that, even though the tax in question is not levied on products as such, it is imposed on the goods transported by vehicles registered in Turkey when they cross the Hungarian border, not on the transport service as such.

Therefore, the Court found that the tax in question, which is imposed unilaterally on products by reason of the fact that they cross the border, constitutes a charge having equivalent effect to a customs duty within the meaning of Decision No. 1/95 of the EC-Turkey Association Council on implementing the final phase of the Customs Union between the EU and Turkey and is therefore incompatible with that decision.

TAGS: tax | Germany | trade | Turkey | Europe | Tax

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