Hungary: ECJ rules against vocational training contribution

Businesses in Hungary with a branch in another EU country could be entitled to reclaim vocational training contributions paid in respect of employees of that branch from 1 May 2004 onwards.

This follows the ECJ’s ruling on 15 April 2010 that some of the rules on vocational training contributions in Hungary were incompatible with the fundamental EU principle of freedom of establishment.

The case concerned a Hungarian company, CIBA Kft, which was fined for not having paid the vocational training contribution in respect of employees at its Czech branch. CIBA claimed that a requirement to pay the contribution in respect of foreign branch employees was incompatible with the principle of freedom of establishment, given that a similar levy applied to the branch in the Czech Republic.

The Hungarian court asked for a preliminary ruling from the ECJ, which decided that any double taxation resulting from parallel taxes in Hungary and the Czech Republic was not in itself incompatible with freedom of establishment.

However, overseas branches were not able to offset the vocational training contributions relating to their employees in various ways whereas companies in Hungary could do so for their local employees (eg by organising training for them). The ECJ ruled that this did infringe the principle of freedom of establishment and could not be justified by the Hungarian Government.

Law: Case C-96/08; Articles 43 and 48 of the EC Treaty