What does it mean? What is its point?
The Electronic Road Transportation Control System (EKAER) will help the tax authority in tracking every product transported in Hungary. The purpose of the system is to make sure that no goods are put in circulation in Hungary that were not previously reported to the Hungarian Tax and Customs Authority (NAV). The introduction of the system is a key element of the regulations serving the whitening of the economy and the fight against corruption.
The system serves the control of the fulfilment of tax obligations in relation to the road transportation of goods in connection with
- the acquisitions of goods or importation for other purposes to Hungary from other member states of the European Union,
- the supply of goods or exportation for other purposes from Hungary to other member states of the European Union and
- the first taxable supply of goods to non-final users within the territory of Hungary.
For this purpose, the persons concerned will have to submit electronic reports to the state tax and customs authority. (Detailed info: https://ekaer.nav.gov.hu/)
What and who is concerned by the reporting obligation (scope of activities, goods)?
Taxpayers (which may be the addressee or the dispatcher depending on the type transport) will have reporting obligation for the purpose of determining the EKAER number in relation to activities (acquisition of goods, other imports, supplies of goods, other exports, domestic supply of goods) involving road transportation performed with vehicles subject to a road toll (having a total weight of over 3.5 tons). In the case of hazardous goods, a special rule will apply to reporting (see point 4). The reporting obligation will apply to the transports started on or after 1 January 2015, with the start of transport meaning the loading of goods onto the vehicle.
It depends on the given circumstances which party will have to fulfil the obligation of reporting in the EKAER system. The addressee will have to report the transport if goods are transported to Hungary from an EU member state. If goods are transported from Hungary to another EU member state and in the case of domestic supplies of goods, the transport must be reported by the party dispatching the goods.
The person having reporting obligation (the legal representative or permanent proxy) will have to report through the “client gateway” (the electronic system for public administration services) all persons who may have access to the web interface to be created for reporting purposes. These persons may submit reports on the EKAER site after providing their user name and password. The person entitled to make electronic reports may not only be the representative of the taxpayer authorized for tax matters as defined in the Act on the Rules of Taxation, but any natural person, who has access to the reporting site of the reporting taxpayer only and submits reports there. Companies should give access to the system to employees who are actually involved in some way in the process of loading.
The reports must contain the following information:
- data of the dispatcher and the addressee (name and tax ID),
- data of the enterprise legitimately using the property located at the address at which hazardous goods are to be unloaded (name and tax ID, if the enterprise is not identical with the addressee),
- the address of loading and unloading,
- the contact details (phone number, e-mail address) from which the reporting of arrival at the delivery address can be made in the case of road transport of goods to a destination within the territory of Hungary and from which reporting of the start of loading of goods onto the vehicle can be made in the case of road transport of goods to another EU member state,
- the following data of the products relating to the EKAER number:
o general description,
o customs tariff code (to 4 digits or, in the case of hazardous goods, to 8 digits),
o gross weight,
o consideration exclusive of tax (in the case of acquisitions and supplies of goods) or acquisition price exclusive of tax or production value (in the case of other purpose transports),
o in the case of hazardous goods, the hazard class number,
o if available, the article number also,
- the reason of the transport (supply or acquisition of goods, toll manufacturing, other),
- the registration number of the vehicle.
Based on the reports submitted, NAV registers the data in the EKAER system. After this, one further data will have to be reported to NAV, depending on the type of the transport:
- in the case of transport to a place of unlading (receipt) within the territory of Hungary, the time of arrival of the vehicle used for the transport of goods to the place of unloading (receipt) (which must be reported by the addressee or, if the recipient is not identical with the addressee, the person receiving the goods in the case of transports from other EU member states and the addressee in the case of domestic transports),
- in the case of transports to other EU member states, the time of starting the loading of goods onto the vehicle used for the transport (which must be reported by the dispatcher or, if the goods are not loaded by the dispatcher, the person loading the goods onto the vehicle).
The person obliged to report data may modify some of the reported data (contact details, quantity of goods, consideration/acquisition price/production value, registration number of the vehicle),naming the cause of the modification. By the main rule, such modifications may be made before the loading of the goods onto the vehicle is started but, in the case of transports from an EU member state to a delivery address in Hungary, the modification may be reported after the loading of the goods onto the transport vehicle until the good’s arrival to the place of unloading (receipt).
Certain transports of goods are exempt from the reporting obligation:
- vehicles of the Hungarian Defence Forces, a Military National Security Service, and law enforcement organizations as defined in the Act on National Defence, the Hungarian Defence Forces and the Measures which May be Introduced under Special Legal Order as well as the Parliamentary Guard,
- vehicles of foreign armed forces staying in Hungary for service or moving across Hungary and official and service vehicles of international military commands set up in Hungary and vehicles of other organizations enjoying exemption based on international agreements, international conventions and reciprocity,
- vehicles taking part in the prevention and elimination of damages caused by a disaster as defined in the Act on Disaster Protection,
- vehicles to which an international agreement, international convention (UN, Shengen Agreement) or reciprocity applies,
- vehicles transporting non-commercial aid consignments (provided free of charge) for humanitarian purposes.
What is the EKAER number?
Based on the reports received, the state tax and customs authority defines an identification number (the EKAER number). In practice, this means that a number is generated on the electronic EKAER interface based on each report submitted with the statutory content elements immediately after the submission of the report if the data content of the report is fully correct. The number is recorded by the system in relation to the given report.
The EKAER number identifies the product unit transported by the vehicle and not the carrier and different types of products, identified with customs tariff codes, may relate to one EKAER number. If goods are transported from one dispatcher to different addressees using the same vehicle subject to road toll, the number of the EKAER numbers and the reports to be made will be determined by the number of addressees. If goods are transported from one dispatcher to one addressees using a number of vehicles subject to road toll, the number of reports to be submitted will be determined by the number of vehicles used, irrespective of whether the consignment consists of one or more different kinds of product (reports will have to be reported for each registration plate).
The EKAER number is valid for 15 days and the time arrival of the goods to the place of receipt or the starting of loading must be reported during this period. The person obliged to report transports must provide the person performing or organizing the transport with the EKAER number so that this person also has the identification number in the case of a potential authority audit. The number may be communicated to the carrier by any means (e-mail also). If the transporter does not know the EKAER number, sanctions will be applied which do not only concern the carrier, however.
What are hazardous goods? What is hazard collateral and does it relate only to hazardous food or other hazardous goods also?
The group of hazardous goods has not yet been precisely clarified and preparation of the relevant decree of the Ministry for National Economy is in progress. According to preliminary information, the decree will detail in a breakdown by customs tariff numbers which products will qualify as hazardous foodstuffs and other hazardous goods.
Irrespective of the fact whether the transport satisfies the conditions detailed in point 1, reporting obligation also applies in the case of hazardous foodstuffs if the goods are transported with a vehicle that is not subject to road toll and the weight of the goods delivered to the same recipient in one transport exceeds 200 kg or its consideration exclusive of tax exceeds HUF 250,000 and, in the case of other hazardous goods, if the goods are transported with a vehicle that is not subject to road toll and the weight of the goods delivered to the same recipient in one transport exceeds 500 kg or its consideration exclusive of tax exceeds HUF 1 million.
In the case of activities performed with hazardous goods involving road transportation, the state tax and customs authority only issues EKAER numbers to taxpayers who satisfy the following conditions in respect of hazardous foodstuffs:
- the taxpayer registered its activity (including the storage activity) as a food entrepreneur operating a facility for first Hungarian storage as prescribed in Decree 3/2010 (VII. 5.) of the Ministry for Rural Development on the supply of data and monitoring relating to the manufacture and distribution of foodstuffs (hereinafter: MfRD Decree),
- the taxpayer fulfilled its obligation of registering the facility for first Hungarian storage as a food entrepreneur operating a facility for first Hungarian storage as prescribed in the MfRD Decree, and
- the taxpayer fulfilled its obligation of providing collateral.
Hazard collateral shall not be provided, in the case of hazardous goods, for all three activities involving road transport by vehicles subject to road toll but only for the following:
- the acquisitions of goods or importation for other purposes to Hungary from other member states of the European Union,
- the first taxable supply of goods to non-final users within Hungary.
Activities performed for toll manufacturing purposes involving road transport are exempt from the obligation of providing collateral in the case of hazardous goods. In addition, the obligation of providing hazard collateral does not apply to the supply of goods or exportation for other purposes from Hungary to other member states of the European Union if the activity is performed with a vehicle subject to road toll in relation to hazardous goods.
The hazard collateral shall be provided first on 31 January 2015 based on data recorded until this date on the EKAER site on the value of hazardous goods. The value of the collateral must continuously reach at the time of report submitting, 15 percent of the aggregate consideration exclusive of tax of the hazardous goods relating to the EKAER numbers issued for the reports submitted in the 60 days before the current report (including the date of submission of the current report) for which arrival to the address of receipt or the start of loading was already reported also and the EKAER numbers already issued and still valid.
If the taxpayer is engaged in both of the activities requiring the provision of collateral, it must only provide hazard collateral in relation to the activity for which the higher collateral amount is determined as a result of the above calculation. The amounts are calculated automatically at the EKAER site.
The collateral may be provided in the form of payment to a separate deposit account or a guarantee assumed by a financial institution, financial service institution or investment firm registered by the state tax authority. Collateral may also be provided by combining the two different forms mentioned above as the collateral amount prescribed by law must be available on an aggregate basis.
Taxpayers are exempt from the obligation of providing collateral if they are included in the database of classified taxpayers maintained by the state tax authority or if they have been in business for at least two years and are included in the database of taxpayers with no public debt also maintained by the state tax authority and if their tax number is not suspended at the time of making the given report. The state tax authority continuously monitors the fulfilment of the conditions of exemption. If the conditions are no longer satisfied, the taxpayer may fulfil its obligation of reporting for the issuing of EKAER numbers according to the general rules, i.e. by providing collateral.
The state tax authority reviews in the 5 days before the end of each month whether the taxpayer providing the collateral has a tax debt, calculated on a net basis, based on the data of tax authority. If the taxpayer has tax debt, the state tax authority may deduct the amount of the debt from the collateral provided. The debt will be considered settled on the day the amount deducted from the collateral is credited to the tax authority. The taxpayer will be sent notice to its electronic user account of the amount of collateral deducted or used up entirely in this way and will have to top up the collateral again for the issuing of further EKAER numbers relating to his future transactions.
What sanctions may relate to reporting?
If the taxpayer fails to fulfil its reporting obligation, the goods will be regarded as having uncertified origin and, from 15 January 2015, the Hungarian Tax and Customs Authority may impose a default penalty of up to 40 percent of the consideration of the unreported goods to the taxpayers having reporting obligation.
In relation to the default penalty sanction relating to non-compliance with the reporting obligation, the Act on the Rules of Taxation provides that in this case, the goods qualifying as goods of uncertified origin may be seized up to the amount of the penalty (with the exception of perishable goods and livestock),which shall be ordered in the resolution of the state tax and customs authority imposing the penalty. Minutes shall be taken of the seizure of the goods. The seized movables may be attached and transported.
We note also that from next year, the state tax and customs authority may also demand a declaration from the addressee, the dispatcher and the carrier concerned in the case of transportation of goods of trading quantity:
- on the description and quantity of the transported goods,
- the description and registration number of the transport vehicle,
- the receipt of the goods and the address of unloading,
- the EKAER number and
- if the place of unloading is not the seat, site or branch office of the VAT-able person, the title of use of the property.
If hazard factors justify or if the VAT-able person concerned by the transport of goods denies to make the above declaration, the state tax and customs authority may apply an official seal on the transport vehicle in the form of a package seal or container seal carrying an official stamp. It is clear based on the above that failure to meet the EKAER reporting obligation may not only imply sanctions for the party obliged to make the report as, if an official tax authority seal is placed on the container of the transport vehicle, the carrier may not be able to use the vehicle for a long time, which would bring a loss of revenue and potential default penalty payment obligation also if the carrier fails to keep agreed deadline.
Is there any connection between the road toll system and the EKAER system? Are carriers released from liability?
The tax authority is entitled to take over all of the data managed in the road toll system by direct access using a special IT application. The reported registration number will serve as a point of connection between the road toll and the EKAER system and make the movement of the goods trackable for the state tax and customs authority.
Otherwise, the road toll system establishes the liability of the carrier, while the EKAER system establishes the liability of the dispatcher or the addressee of the goods. Carriers have practically no liability in relation to the EKAER system (only the dispatcher or the addressee of the goods) as the carrier has no reporting obligation. A seizure of the goods may, however, have a very sensitive impact on the carrier also.
Where can we find the relevant regulation?
The regulation relating to the EKAER system is included in Act XCII of 2003 on the Rules of Taxation (including the annexes) and the decree of the Ministry for National Economy to be issued on the execution of the legal regulation. We intend to publish a further newsletter on the matter after the promulgation of the decree of the Ministry for National Economy specifying detailed rules.
Certain rules are also included in Act I of 1988 on Road Traffic, Act LXVII of 2013 on Tolls Payable in Proportion to the Distance Travelled for the Use of Motorways, Highways and Main Roads and Act LXVI of 2008 on Food Chain Stores and their Authority Supervision.