European Commission urges Hungary to abolish Retail Tax
The European Commission has issued a reasoned opinion to Hungary (INFR(2024)4022), urging it to align its retail tax regime with the freedom of establishment guaranteed under Articles 49 and 54 of the Treaty on the Functioning of the European Union (TFEU).
In January 2025, Hungary’s retail tax was extended to non-resident marketplaces.
Hungary’s current retail tax system imposes steeply progressive turnover-based taxes on foreign-controlled retail companies operating as integrated groups or linked undertakings. In contrast, domestic retailers operating through franchise systems—under separate legal entities—are taxed less heavily, as their turnover is not consolidated. This structure prevents foreign businesses from restructuring their operations to reduce tax burdens and, according to the Commission, unjustly restricts their right of establishment within the EU.
Scaling retails sales tax rate
- 0% sales below HUF 500m
- 0.15% sales HUF 500m to HUF 30bn
- 1.0% sales HUF 30bn to HUF 100bn
- 4.5% sales above HUF 100bn
This issue has been raised in Hungary’s 2023 and 2024 Country Specific Recommendations, which noted that the tax disproportionately affects larger, foreign-owned firms. Although Hungary committed to phasing out this retail surtax as part of its Recovery and Resilience Plan (RRP), endorsed by the Council in December 2022, no concrete steps have been taken. Instead, Hungary has prolonged and increased the highest tax rates, without a clear end date.
The Commission now gives Hungary two months to address the issue. Failure to comply may result in the case being referred to the Court of Justice of the European Union, escalating legal consequences for continued non-compliance with EU internal market principles.
See more in our Hungary VAT guide.
