BUDAPEST: Embattled US ride-hailing service Uber announced Wednesday its first suspension in a European Union (EU) country, saying it will halt operations in Hungary on July 24 because of new legislation making it “impossible” to operate.

The same day, a new law comes into force that allows the Hungarian authorities to block “a provider of taxi services operating without a proper dispatch centre” for up to one year.

A statement by Uber said that the legislation passed by parliament last month “makes it impossible for Hungarian drivers, in spite of having licences and properly paying taxes, to use their own vehicles to make money”.

The US company has become one of the world's most valuable startups, worth some $50 billion, as it has expanded to more than 50 countries including 21 EU member countries other than Hungary.

Last month Saudi Arabia pumped $3.5bn into the company to help it fund further growth. The firm says it is not a transport company like taxi firms, and that it simply connects drivers with passengers.

But it has faced regulatory hurdles and protests from established taxi operators in most locations where it has launched. Last week a French court fined it 800,000 euros ($900,000).

In Europe, Uber has filed complaints with Brussels against France, Germany and Spain, arguing that restrictive national or city policies are in violation of EU law.

'Punishing innovation'

Since Uber entered the Hungarian market in November 2014, around 1,200 drivers and 160,000 riders have registered with the company.

The new law followed months of protests by licensed taxi drivers who complained that orders have been decreasing sharply.

They say Uber drivers -- who often charge significantly cheaper fares -- should be subject to the same stringent rules regulating official cabs.

Uber's head in Hungary told AFP on Wednesday however that the legislation “punishes innovation, is disadvantageous to both competition and consumers, and provides no advantage to the state”.

Around 39-40 per cent of Uber trips were ordered by foreigners, and most of their clients were between 20 and 35 years old, Zoltan Fekete said.

“On several occasions we signalled our willingness to help put together a modern set of regulations, but there was no interest for that,” he said.

A government ministry said that Uber had decided to leave Hungary “rather than to agree to operate legally and compete fairly on the market with tax-paying Hungarian taxi drivers”.

“The government supports innovative solutions, but is committed to ensuring that players on the passenger transport market operate according to the law and pay taxes under equal terms,” said a statement by the National Development Ministry published by the MTI news agency.

“Uber acquired an edge over other market competitors by dodging taxes and disregarding rules and regulations”.

Uber hopes one day to restart its service in Hungary, said Robbie Khazzam, the firm's boss in Central Europe.

“Hungary stands out as the exception and not the rule,” he told AFP. "We are definitely not giving up on Hungary."