Source Curia
On 3 March 2020, the European Court of Justice gave its judgment in case C‑323/18 (Tesco-Global Áruházak Zrt.). This case deals with the question if a specific turnover tax in the store retail trade sector is allowed.
Decision
Articles 49 and 54 TFEU must be interpreted as not precluding the legislation of a Member State that establishes a steeply progressive tax on turnover, the actual burden of which is mainly borne by undertakings controlled directly or indirectly by nationals of other Member States or by companies that have their registered office in another Member State, due to the fact that those undertakings achieve the highest turnover in the market concerned.
Facts (simplified):
Tesco (Hungary) is engaged in store wholesale and retail trade. As a member of a group that has its registered office in the United Kingdom, it is the retail chain that achieved the highest turnover in the Hungarian market.
The Hungarian tax authorities raised an assessment on a special ‘store retail trade tax’. Tesco argued that this tax has no legal basis, and adversely affects freedom of establishment, the freedom to provide services and the free movement of capital. Further, that legislation is contrary to the principle of equal treatment, constitutes prohibited State aid and is contrary to Article 401 of the VAT Directive.
Tesco claims in particular that, because of the steeply progressive scale of the special tax and the structure of the Hungarian retail trade market, all the companies that fall within the lower bands are companies which are owned by Hungarian natural persons or legal persons, and which operate within franchise systems. Conversely, the companies that fall within the highest band are, with one exception, undertakings linked to companies that have their registered office in another Member State. Accordingly, the companies owned by foreign natural persons or legal persons bear a disproportionate share of the burden of that tax.
The Fővárosi Közigazgatási és Munkaügyi Bíróság (Administrative and Labour Court, Budapest) decided to refer the following questions to the Court for a preliminary ruling:
‘(1) Is the fact that taxable persons under foreign ownership which operate a number of retail establishments through a single company and which are engaged in store retail trade in fact have to pay the special tax corresponding to the highest band of a steeply progressive tax rate, whereas taxable persons under domestic ownership operating as a franchise under a single banner — through stores which generally constitute independent companies — are in fact included in the exempt band or are subject to one of the lower tax rates following that band, with the result that the proportion of the tax paid by companies under foreign ownership of the total tax collected through the special tax is substantially higher than in the case of taxable persons under domestic ownership, compatible with the provisions of the FEU Treaty governing the principles of non-discrimination (Articles 18 and 26 TFEU), freedom of establishment (Article 49 TFEU), equal treatment (Article 54 TFEU), equal treatment as regards financial participation in the capital of companies or firms within the meaning of Article 54 TFEU (Article 55 TFEU), freedom to provide services (Article 56 TFEU), free movement of capital (Articles 63 and 65 TFEU) and equality of taxation of companies (Article 110 TFEU)?
(2) Is the fact that taxable persons which operate a number of stores through a single company and which are engaged in store retail trade in fact have to pay the special tax corresponding to the highest band of a steeply progressive tax rate, whereas taxable persons under domestic ownership which are their direct competitors and which operate as a franchise under one and the same sign — through stores which generally constitute independent companies — are in fact included in the exempt band or are subject to one of the lower tax rates following that band, with the result that the proportion of the tax paid by companies under foreign ownership of the total tax collected through the special tax is substantially higher than in the case of taxable persons under domestic ownership, compatible with the provisions of the FEU Treaty governing the principle of the prohibition of State aid (Article 107(1) TFEU)?
(3) Must Articles 107 TFEU and 108(3) TFEU be interpreted as meaning that their effects extend to a tax measure an intrinsic part of which is a tax exemption (constituting State aid) financed by means of the tax receipts generated by the tax measure, where the legislature has, before the introduction of the special tax on retail trade, predetermined (on the basis of the turnover of market operators) the amount of budgetary revenue, through the application of progressive tax rates based on turnover and not through the introduction of a generally applicable tax rate, so that the legislature has deliberately ensured that a category of market operators qualify for a tax exemption?
(4) Is a practice of a Member State, whereby, during tax inspections commenced ex officio or subsequent court proceedings it is not possible — despite the principle of effectiveness and the obligation to disapply an incompatible provision of national law — to submit an application for a refund of tax set under a national tax provision which is contrary to EU law, on the ground that the tax authority or the court examines the issue of incompatibility with EU law only in special proceedings commenced on application by a party and only prior to the ex officio procedure, whereas, as far as tax which has been set in breach of national law is concerned, there is nothing to prevent an application for a refund from being submitted in proceedings before the tax authority or a court, compatible with the principle of procedural equivalence and the principles of the effectiveness and primacy of EU law?’
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