Press Release: Taxation: Commission refers Hungary to Court over tax exemption of pálinka

The European Commission decided to refer Hungary to the European Court of Justice for granting an exemption from excise duty to the production of fruit distillates (pálinka) on 21 February 2013.

Hungary exempts pálinka from excise duty when it is produced by households or distilleries for personal use, up to a maximum of 50 litres a year.

Excise duties for alcohol are harmonised under EU legislation in order to avoid distortions of competition in the internal market. Under that Directive, Hungary is allowed to grant a 50% reduction of the normal excise rate to pálinka produced by distilleries, for personal use, up to 50 litres a year. The exemption applied by Hungary to the production of pálinka therefore goes beyond what is allowed under EU legislation.

The referral to the EU Court of Justice is the last step in the infringement procedure.