The European Commission warned Hungary on Friday over its tax on second-hand cars imported from other EU member countries.
In a statement cited by Dow Jones, the Commission said it had asked Hungary to explain the law or face possible legal action at the European Court of Justice.
Under Hungarian law, a car is subject to a registration tax when imported. The tax is the same for both new and second-hand cars.
“Member states are free to introduce and also to increase the level of registration taxes on motor vehicles,” EU Tax and Customs Commissioner Laszlo Kovacs said, according to Dow Jones. “But they must respect the treaty principle of non-discrimination.”
The Commission reportedly said it believes that charging the same tax on new and used vehicles constitutes discrimination and fails to “take account of the real wear and tear undergone by the vehicle.”
Hungary also applies a surcharge of 25% on second-hand vehicles imported from other member states. The European Court of Justice has ruled that car registration taxes must not discriminate between imported and domestically sold cars and the Commission said the Hungarian rule does just that, taxing imports at a higher rate than domestic cars, Dow Jones noted.