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Hungary extends the Food Chain Supervision Fee to VAT registered foreign businesses

Hungary extended the scope of the food chain supervision fee (FCSF) to foreign businesses registered for VAT in Hungary. Previously only domestic companies were obliged to pay FCSF. The food chain supervision fee (FCSF) is a tax on the food supply chain activities. FCSF rate is 0.1 % and it is levied on the net sales revenue derived from such activity.

Previously foreign businesses VAT registered in Hungary operating on the Hungarian food chain supply market where obliged to obtain the so-called FELIR number for technical purposes, without an obligation to pay FCSF. The authorities use the FELIR number to track the movement of products in the food chain supply for quality control purposes. Due to the recent changes, effective from June 2017, the obligation to pay FCSF has been extended to foreign companies VAT registered in Hungary.  

Who are affected in food chain supervision fee payment?

All businesses are subject to the new obligation who have FELIR number and carry out the following activities in Hungary:

  • persons who place animals on the market that are kept for food production, breeding or experimental purposes;
  • person who place food or fodder crops, seeds, plant products, and certain propagating and planting material on the market;
  • food businesses (production, processing and distribution of food);
  • registered or authorised feed businesses;
  • persons who manufacture or place on the market veterinary medicines and veterinary medicinal products;
  • persons who manufacture or place on the market “EEC fertilizer” or other products subject to authorisation;
  • persons involved in the handling, use, further processing and transport of animal by-products or placing derived products on the market;
  • businesses engaged in the transport of live animals; persons operating facilities for the cleaning and disinfection of vehicles used for transport of live animals, isolation facilities for receiving animals from different stocks, livestock loading ramps, assembly centres, trading sites, feeding and watering stations, rest stations and livestock fairs;
  • persons manufacturing and storing plant propagation material;
  • persons operating a registered or authorised laboratory;
  • persons placing devices on the market that are used for marking animals.

What this means potentially to business enities?

If you fall within the above list, thus pursuant to the amendment:

  • you have to comply with the e-reporting obligation by 31st May following the reporting year, i.e. first time by 31st May 2018;
  • the annual food chain supervision fee is 0.1% of the net sales revenue (excluding excise duty and public health product tax) derived in the preceding year from these activities; 
  • the supervision fee is payable in two equal instalments: the first instalment by 31st July, and the second by 31st January of the following year, i.e. first time by 31st July 2018 and 31st January 2019.

Possible consequences of non-compliance

Please note that in case of non-compliance of the above obligations the amount of the default penalty shall be between HUF 10,000 and HUF 500,000 (~ EUR 1,600),but maximum 10% of the net sales revenue from the previous financial year on which the supervision fee is based.

We should also highlight that unpaid supervision fees and default penalties shall be treated as outstanding public dues enforced as taxes.

If you are involved in the Hungarian food chain supply, RSM Hungary can help you to understand your FCSF obligations better and potentially offer structuring advice. The amendment of the law raises a number of practical questions for the foreign companies such as how the tax base for 2017 should be calculated and how the net turnover should be supported etc.  Therefore, we urge you to remain alert and upon request we are happy to discuss this new requirement in more details and assist in fulfilling the new obligation.

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