Case C-253/09: Action brought on 8 July 2009 — Commission of the European Communities v Republic of Hungary
Date: 2009-07-08
Institutions: Court of Justice
Subjects: European Commission, Hungary, action for failure to fulfil an obligation, equal treatment, free movement of persons, housing, right of establishment, tax law, tax relief








C_2009233EN.01000601.xml










26.9.2009   


EN


Official Journal of the European Union


C 233/6





Action brought on 8 July 2009 — Commission of the European Communities v Republic of Hungary
(Case C-253/09)
2009/C 233/10
Language of the case: Hungarian

Parties


Applicant(s): Commission of the European Communities (represented by: R. Lyal and K. Ritzné Talabér, Agents)

Defendant(s): Republic of Hungary

Form of order sought







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Declare that the Republic of Hungary has failed to fulfil its obligations under Articles 18 EC, 39 EC and 43 EC and Articles 28 and 31 of the EEA Agreement by giving less favourable treatment to the purchase of residential property in Hungary on the sale of residential property in another State than is given to the purchase of residential property in Hungary on the sale of residential property in Hungary.










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order the Republic of Hungary to pay the costs.





Pleas in law and main arguments

The subject of the present action is the provision of Hungarian tax law under which, to establish the taxable amount at the time of acquisition of residential property situated in Hungary, it is only possible to deduct the price of the property sold from the value of the property purchased if the former is situated in Hungary.
This rule is contrary to the principles of freedom of movement for persons and freedom of establishment laid down by Articles 18 EC, 39 EC and 43 EC and Articles 28 and 31 of the EEA Agreement.
The purpose of the above provisions of Community law is to facilitate the exercise of professional activity of any type anywhere in the Community for citizens of the Member States and, at the same time prohibit any measure as a result of which citizens of any Member State of the Community who, in exercise of their right to freedom of movement, wish to carry out an economic activity in the territory of another Member State are placed in a less favourable position. It is settled case-law that provisions which prevent or discourage a national of a Member State from leaving his country of origin to exercise his right to freedom of movement constitute obstacles to that freedom even where they apply regardless of the nationality of the persons concerned.
However, the Hungarian tax law which is the subject of this action is a provision of that sort. As a result of the exclusion of the tax advantage described, foreign or Hungarian citizens who exercise their right to freedom of movement and live for some time in another Member State and purchase property there, will have less incentive to purchase residential property in Hungary than those who live in Hungary and buy a new property to replace that they already have in the territory of the country. In that way, the Hungarian legislation may, clearly, have the effect of discouraging citizens of other Member States from settling in Hungary. The Commission considers that such persons, who may have already paid taxes of a similar amount in the State where they previously resided when they bought their property, are in the same situation as those who bought their previous residence in Hungary. Consequently, such persons must receive the same treatment. However, since the Hungarian legislation places those who buy residential property to replace property in any other Member State in a worse position than those who likewise bought property but already had property within the territory, it treats situations which are objectively the same differently and thus constitutes discriminatory legislation.
The only argument put forward by the Government of the Republic of Hungary is not such as to justify such a breach of law.
First, as regards the objection relating to the need to guarantee the cohesion of the tax system, it must be observed that, in the present case, no direct relationship can be discerned between the tax advantage in question and the offsetting of that advantage through a particular tax base, which is required so that the alleged need to guarantee the cohesion of the tax system can constitute a justified limitation on the exercise of the fundamental freedoms. From an economic point of view, there is no direct relationship between the acquisition of another property and the obligation to pay tax, and the sale of the first property and the taxes paid at that point in time, these being matters which only the Hungarian legislature considers to be connected.
Finally, regarding the argument put forward by the Hungarian Government that the need to take account of properties sold in other Member States and the taxes paid at the time of their purchase and the prevention of abuses which may have occurred in connection with those transactions would cause serious administrative problems, the Commission states that potential administrative difficulties cannot in any event justify the infringement of the fundamental freedoms guaranteed by Community law. The Republic of Hungary does have the option of imposing specific requirements in order to obtain the necessary information, but those requirements may not be disproportionate to the objective pursued.