Local and municipal taxes annulled

26 September 2018


Over the past few months the Curia has annulled several decisions concerning certain municipal decrees and their detailed rules. In this context, we would like to mention four cases which – according to our view – may also be useful for taxpayers located in other municipalities due to possible analogies and parallels.


  1. Property tax (Siklós)

The Curia discommended the tax rate of the property tax in Siklós. The tax rate according to the act which was valid until the 31st of December 2016(after that this rule was modified) was not sufficiently differentiated, what is more, it is confiscating, therefore, it was considered unlawful. In case at hand, the amount of the property tax reached annually 200% of the value of the property. The amount payable was determined only by the size of the plot and did not differentiate on the basis of the taxpayers, the nature and the location of the plots.

It means that the amount of HUF 150 per square meter itself was not unlawful, but in this case the legislation generated such a special case, by which the regulation in whole became confiscating and not enough differentiating, hence considered to be illegal.


  1. Property tax (Szeged)

In Szeged one rule about property tax was repealed because the Curia had found it unlawful. The decree of Szeged municipal contained a list for certain types of plots triggering tax liability. According to this, only one type of taxable property was classified in one type. When the property tax was introduced in Szeged the Local Tax Act clarified that local municipalities have to determine the local tax rate in such a way that the tax rate has to adjust to the local characteristics, the requirements of local economy and the taxpayers’ paying ability. (This rule was modified later).

In the present case, due to the failure of taking into account the local characteristics, the tax burden actually affected only one given taxpayer individually which caused indirect discrimination – without legitimate fiscal (tax) objective.


  1. Fieldland tax (Balatonfüred)

This tax theoretically does not affect entrepreneurial activity, but the experiences suggest that law-abusive legislation may also occur, therefore, it can be recommended to consider the following as well.

The Curia retrospectively annulled the municipal decree which named and obliged to pay tax after exactly 14 given properties, by which the tax subjects were named almost individually. Furthermore, from the purpose of the legislation was considered not to be compatible with the principle of equal tax treatment (the main objective was to sanction the utilization other than agriculture and to „maintain” the properties in good condition). The Curia stated that the municipal tax provision is unlawful if it does not take into account the principle of equal tax treatment and equality of rights, which would be achieved if the tax liability was imposed to enforce special behavior.


  1. Tax liability after newly-built flats (Veresegyház)

One of the main rules of municipal taxes is that this kind of tax cannot be imposed on properties which is already subject to other local tax (this case it is the property tax). The provisions annulled by the Curia taxed the newly-built flats in such a way that the subject of the tax was simultaneously exempted from paying the local tax (property tax).

However, the Curia emphasized that taxable income subject to local tax cannot be subject to municipal tax, as well, even if the subject of municipal tax is exempted from other local tax liabilities.

Lili Szenkovits |