SPAR claims that the tax forces foreign retailers to operate at a loss. Credit: csikiphoto via Shutterstock.

The Hungarian government has announced its intention to initiate legal proceedings against the supermarket chain SPAR, alleging defamation. 

Reuters reported the development citing Prime Minister Viktor Orban’s chief of staff Gergely Gulyas’ statement in a press conference.   

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Gulyas was quoted as saying: “Proceedings will be opened against SPAR, in court, and presumably for defamation.”  

This move follows after Hungary announced a special tax in 2020, which applies to traditional retail sales in brick-and-mortar stores, as well as online via websites.  

The new retail surtax also applied to foreign entities with no permanent establishment in Hungary and are involved in distance-selling goods to Hungarian customers. 

The current tax rate in the country is now up to 4.5% of revenues. 

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Hungarian competitors operating in franchise chains reportedly receive a lower tax rate of up to 1%. 

Earlier this year, the Austrian government and SPAR raised complaints with the EU commissioners, claiming the tax discriminates against foreign retailers.   

The tax is also claimed to breach the EU law. 

In the letters sent to the EU commissioners as seen by Reuters, SPAR CEO Hans Reisch said: “Foreign-owned retailers, including SPAR Hungary… face the highest tax bracket of the special tax.”  

Earlier this month, the European Commission responded to this allegation saying that it is examining the complaints and will take appropriate action.