The move aims to ensure compliance with the principle of freedom of establishment.

In its June 2025 infringements package, the European Commission issued a reasoned opinion to Hungary on 18 June 2025, urging the country to abolish its retail tax regime. The move aims to ensure compliance with the principle of freedom of establishment.

The European Commission decided to send a reasoned opinion to Hungary (INFR(2024)4022) for failing to bring its retail tax regime in line with the freedom of establishment guaranteed by Articles 49 and 54 of the Treaty on the Functioning of the European Union.

Due to the current design of the retail tax regime, foreign-controlled retail companies operating in Hungary as integrated companies or linked undertakings are subject to high and steeply progressive tax rates on their turnover. Domestic retailers operating on the Hungarian market under their respective brands and logos via franchise systems are not subject to the same highest rates because their turnover is not consolidated for taxation purposes.

Notably, the regime prevents the foreign-controlled retail companies from restructuring their business operations like those of domestic retail companies. Therefore, the retail tax regime constitutes a restriction on the freedom of establishment. According to the 2023 and 2024 Country Specific Recommendations (CSR) to Hungary, this tax disproportionally burdens larger foreign companies, similarly to other sector-specific taxes introduced in recent years and affecting the internal market.

As part of its Recovery and Resilience Plan (RRP), which was endorsed by the Council on 15 December 2022, Hungary committed to phase out the retail tax, which had been introduced in 2022 to increase the contribution of the retail sector to public finances.

However, Hungary has so far failed to phase out the surtax on the retail sector. On the contrary, Hungary has consistently prolonged this tax measure without indicating a clear timeline for expiry so far, and has, over time, increased the highest tax rates applicable under the retail tax regime.

Therefore, the Commission has decided to issue a reasoned opinion to Hungary, which now has two months to respond and take the necessary measures. Otherwise, the Commission may decide to refer the case to the Court of Justice of the European Union.