EU: EC sends letters of formal notice to Hungary, Ireland, Italy and Romania concerning discriminatory taxation of income from bonds

The European Commission (EC) on October 1, 2026, announced its decision to send letters of formal notice to Hungary, Ireland, Italy and Romania concerning their discriminatory taxation of income derived from bonds:

• Hungary: Interest earned on Hungarian government bonds is exempt from individual (personal) income tax and social contribution tax, while interest from comparable EU/EEA government bonds is taxed under the ordinary rules.
• Ireland: Capital gains on bonds issued or guaranteed by the Irish government and certain public bodies are exempt from capital gains tax, while gains on comparable EU/EEA bonds are generally subject to tax.
• Italy: Certain nonresident investors can benefit from a withholding tax exemption on interest and other income from Italian corporate and government bonds, but only if the bonds are deposited with an Italian financial intermediary, an Italian permanent establishment (PE) of a nonresident intermediary, or in some cases, a nonresident intermediary that has appointed an Italian tax representative.
• Romania: Capital gains derived from the transfer of securities and other financial instruments when the financial intermediary handling the transaction is not established in Romania are subject to higher tax rates than those applicable when the intermediary is established in Romania.

A letter of formal notice is the first step of an infringement procedure. Hungary, Ireland, Italy, and Romania are required to respond to the EC's concerns within two months. In the absence of a satisfactory response, the EC may decide to proceed by issuing a reasoned opinion.

Read an October 2026 report prepared by KPMG’s EU Tax Centre