Hungary: ECJ to rule on vocational training contribution

The ECJ is to rule on a key issue for taxpayers wishing to re-assess taxes which could possibly have been paid in breach of EU rules.

The preliminary ruling is to be given in a case about the vocational training contribution between CIBA Kft. and the Hungarian Tax Authority, although the tax base for this contribution has been modified since the case began.

CIBA Kft. is established in Hungary but operates a branch in the Czech Republic. It fulfills its tax and social security obligations in the Czech Republic as regards its workforce there. During a tax audit by the Hungarian Tax Authority, CIBA was found not to have included the wage costs of its Czech branch in its calculation of the tax base for the vocational training contribution (at the time equal to CIBA’s total wage costs).

CIBA claimed that, as it already paid a similar contribution for employees in the Czech Republic, its right to freedom of establishment under the EC Treaty would be infringed if it had to pay the vocational training contribution in Hungary as well.

In the Advocate General’s opinion, which is however not binding on the ECJ, the way in which the contribution was imposed was found to infringe the principle of freedom of establishment. The Advocate General ruled that the offset facility (ie the ability to offset the costs of special activities against the vocational training contribution liability) is only available in an employer’s establishments in Hungary and not for the workforce based in another Member State.

Further details will be provided when the ECJ delivers its judgment, expected on 15 April 2010.

Law: ECJ case C-96/08: CIBA Speciality Chemicals Central and Eastern Europe Szolgáltató, Tanácsadó és Keresdedelmi Kft.; EC Treaty Articles 43, 48