Global trends and a system of domestic rebates are putting strong pressure on the price of construction raw materials, which the government is trying to curb with some administrative measures, according to a Government Decree published on 8 July. Companies manufacturing and distributing construction raw materials must comply with the following new rules:
- Registration becomes compulsory for exports of construction raw materials and products
- EKAER obligation for the transport of construction raw materials and products enters into force
- An additional mining levy is introduced
- Minimum extraction capacity
- GVH (competition authority) may launch an accelerated sector inquiry into the construction sector
The first three measures have tax or fiscal implications, which are examined in more detail below.
1. Registration obligation for exports of construction raw materials and products
Which construction materials are subject to the notification obligation?
The Annex to the Government Decree* lists in detail the raw materials and products (construction materials) of strategic importance for security of supply in the construction sector. These include gravel, pebbles, crushed stone, cements, mortars, concrete, cotton, and various metal raw materials.
Which construction material transactions are subject to the notification obligation?
The obligation of registration and notification applies to the sale and export of building materials subject to notification from Hungary to foreign countries. However, it does not apply to building materials in transit through the territory of Hungary.
Who is subject to the notification obligation?
The obligation to notify the registration applies to natural persons, private entrepreneurs, legal persons, or other organisations who sell construction materials subject to notification from Hungary to foreign countries and to those who intend to export them abroad.
Pre-emption and purchase right of construction raw materials
During the examination of the notification, the Hungarian State has the right of pre-emption for construction raw materials intended to be sold abroad, and the right of purchase for construction raw materials intended to be exported abroad, if it is to be delivered to the notifier's own establishment abroad for its own use. This right is exercised by the Minister responsible for the supervision of state property through the Magyar Nemzeti Vagyonkezelő Zártkörűen működő Részvénytársaság.
2. EKAER obligation for construction raw materials and products
As of 9 July 2021, the scope of products subject to EKAER notification has been extended: from this date, the raw materials, and products of the construction industry listed in the Annex to the Government Decree** must also be notified.
The Annex to the Decree** lists in detail the raw materials and products (construction materials) of strategic importance for the security of supply of the construction industry subject to EKAER notification. These include gravel, pebbles, crushed stone, cement, mortars, concrete, certain wood products, cotton, various metal raw materials, prefabricated wooden buildings, etc. The scope of products subject to EKAER notification is not exactly the same as the scope of products mentioned in the previous point, although there is some overlap.
No security is required for these products, only their registration has become compulsory.
3. Additional mining levy on construction industry raw materials
Who is subject to the additional mining levy payment obligation?
The additional mining levy payment obligation only applies to companies with a net turnover of HUF 3 billion in 2019 that are otherwise liable to pay the mining levy. Companies whose main activity is quarrying, mining of stone, gypsum, and chalk (TEÁOR 0811),mining of gravel, sand, and clay (TEÁOR 0812),production of cement (TEÁOR 2351),or production of lime and gypsum (TEÁOR 2352) will be liable to pay the key.
How much is payable?
The person liable to pay the additional mining levy is obliged to pay the 90 per cent tax on the price band above the unit price as an additional mining levy above the price of the raw material extracted or processed by him and used as construction industry raw material, as specified in the Decree.
The net pricing thresholds for the individual products are set as follows:
a) graded sand 700 HUF/tonne,
b) graded gravel 900 HUF/tonne,
c) graded sandy gravel 700 HUF/tonne,
d) natural sandy gravel 700 HUF/tonne,
e) cement 20,000 HUF/tonne.
The recent measures announced to raise a number of questions, and it is worth checking with a tax adviser on the detailed rules to ascertain the exact expectations for a particular business.