The new EPR fee will also transform the environmental product charge system
The decree laying down detailed rules on extended producer responsibility (EPR) clearly defines the product streams - the product groups covered by the scheme - subject to the EPR fee.
Companies subject to the EPR fee:
- companies currently subject to the product charge
- transferors of a circular product in Hungary, free of charge or for consideration
- companies importing the product from abroad for domestic sales or for own use
- ompanies that buy packaging and sell their products generating packaging. (Important! It is not the cardboard box manufacturer who is liable, but the entity selling its product in the cardboard box)
Product flows, circular products affected
- packaging
- certain single-use and other plastic products:
- food containers, bags or wrappings made of flexible materials, beverage containers with a capacity of maximum three litres, beverage cups, lightweight plastic carrier bags, wet wipes, balloons, tobacco products with filters, fishing gear
- electrical and electronic equipment
- batteries and accumulators
- vehicles
- tyres
- office paper
- commercial printing paper
- cooking oil and fat*
- textile products*
- wooden furniture*
*new compared to the product charge
This clearly shows that the EPR product streams overlap with almost all the products subject to the environmental product charge
In order to avoid double payment for the same product groups - both product charge and EPR fee would have to be paid for the same product - the product charge regulation was amended at the same time as the EPR was introduced, providing for the possibility of deducting the EPR fee when calculating the product charge liability.
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Double administration and duple fees
Looking at the rules, it is clear that anyone affected by product charge liabilities today will certainly be subject to the EPR fee. Obviously, only one of the two charges will be payable, but both regulations will still impose registration, declaration and payment obligations on entities, even if the rules only require the entity to pay the EPR fee.
You are not mistaken to think that there is a double registration and declaration obligation for the same product stream. Entities who have paid a product charge so far and will pay an EPR fee in the future will not be exempt from the obligations pertaining to the product charge.
Although the rate is not yet known, it is highly probable that the EPR fee will exceed the product charge formerly paid on the product, based on the principles of calculation; therefore in the product charge filing you will only need to indicate that no product charge is paid on the product based on the EPR liability.
Lots of questions, short time and a great deal of tasks
Several questions may arise about the future application of EPR, but entities do not have much time to dwell on these as the time limit provided by the legislation is very tight.
Let's take a look at what companies subject to EPR need to do
The first step for businesses is to define the level EPR liability affects them.
1. Compulsory registration
Companies must register with MOHU by the end of April. Detailed information on the registration process, which is already underway, can be found on the MOHU website.
2. Registration and record keeping system
After the MOHU registration, entities affected by the EPR must apply for registration with the waste management authority by 31 May, but this is not yet possible.
Following successful registration, all entities concerned should set up their record keeping systems ready to track the movement of the relevant products live from 1 July.
3. Regular payment of the EPR fee
The first declaration is expected to be filed at the end of the third quarter, when the EPR fees are first paid.
The range of products and companies subject to EPR has expanded significantly – several companies are still unaware!
In RSM's experience, a significant proportion of entities are not yet aware of the EPR scheme and the obligations it entails.
This is particularly true for entities who have not been subject to the product charge before and are now affected through the new product streams subject to EPR – textiles, furniture.
This is a completely new scheme for them bringing not only the administrative burden but also payment obligations. Textile products have been defined as a very broad category in the EPR system, and all entities who import such products from abroad with a view to selling or using them for their own purposes are concerned in addition to the manufacturers.
CONTACT OUR EXPERTS IN RELATION TO THE EPR FEE
Packaging materials are a good example of the questions around the new EPR fee. The broadest product stream affected by the payment of the product charge has been packaging materials. This product stream is also affected by the EPR, but it is not the same whether the entity manufactures packaging or generates packaging.
Until now, the manufacturer of packaging material paid the product charge when selling the material to those who packaged their products in it.
However, the EPR now requires the entity that generates packaging to pay the fee, i.e. the entity that packages and sells his product using the packaging material purchased. Until now, these entities were not affected by the product charge, and for them the EPR is a new obligation that I think many are not yet aware of.
Moreover, there are exceptions to the above rule, so it is highly advisable to seek advice on the assessment of the product charge and EPR implications of packaging to avoid any misunderstandings in the future.
Waste management authority and MOHU to replace the Hungarian Tax Authority
It is also interesting, and of particular relevance to the EPR, that as long as the Hungarian Tax Authority coordinated the product charge, it has almost nothing to do with the EPR.
The waste management authority is supervising the EPR obligations and is responsible for the authority tasks. This is the authority where entities must register and to whom the quarterly returns are filed. However, the EPR fee is not payable to the authority, but to the concessionaire MOHU.
This name is to be remembered, as MOHU plays a major role in waste management as a concessionaire. In addition to coordinating the operational tasks of waste management, it is also the recipient of the EPR fee, and will use the amount to finance its operational tasks.
This means that a fee previously paid to the central budget has been transferred to the concessionaire engaged in waste management.
As long as the Hungarian Tax Authority has considerable experience in dealing with the obligations of hundreds of thousands of taxpayers, it is questionable how the waste management authority will cope with the task, as it has not, in my view, yet encountered the mass registration and filing activities to be expected in the system.
In any case, the law states that the waste management authority is responsible for the EPR fee; therefore this is the authority to contact in case of any disputes regarding the fee payable or the obligations, as well as with any general questions of interpretation. It is also the waste management authority's power and duty to control the system and impose penalties.
