Changes in the EKAER system: everybody can sit back?

The new EKAER regulation – Decree No. 13/2020 of the Ministry of Finance –, published on 23 December, rewrote the previous regulation of the Electronic Public Road Trade Control System (henceforth: “EKAER”) in favour of taxpayers on several points. However, this does not mean that there will be no pitfalls in the system. The changes took effect on 1 January 2021, in this current newsletter we have summarized the most important details.

Under the regulations in force since 1 January 2021, the EKAER reporting obligation covers the following activities:

• intra-Community acquisition,
• intra-Community sale,
• import and export for other purposes, and
• first supply of goods subject to VAT to a non-direct end-user in Hungary.

But only, when one of the above-mentioned activities is carried out by road transportation (by any kind of motor vehicle) and when so-called notifiable products are transported.

In the terminology of the new regulation, the range of notifiable products is the same as the range of the previous “risky products”, which are defined in Decree No. 51/2014 of the Ministry for National Economy.

The notifiable products are therefore entirely equivalent to the risky products in the previous terminology, and the range of these products has not changed: it has not expanded, nor has it narrowed. Under the new rules, there are “notifiable (formerly: risky) foods” and “notifiable (formerly: risky) other products” for which the tariff headings have remained unchanged.

In other words, for products that were not risky products before, the EKAER obligation has been ended. Whatever is the mean of transport for a non-notifiable product, whatever its weight or value, the taxpayer concerned is not required to make a declaration under the rules of the EKAER.

Furthermore, although the scope of activities subject to EKAER has not changed, but we would like to emphasize, that, in contrast to the previous regulation, the reporting obligation already applies to all motor vehicles, regardless of the toll obligation or the total weight of the given motor vehicle.

At the same time, the rules of the EKAER exemption for previously risky products also remained in force, so, among other things, there is no EKAER obligation for transports from the same consignor to the same consignee with the same vehicle, as long as neither the product value exceeds HUF 1 million (approx. EUR 2,777), nor the product mass exceeds 500 kg.

However, the new regulation also allows for voluntary declaration, i.e. when a taxpayer decides to meet the legal obligations of the EKAER regulation at his own (or his business partner’s) discretion, even if the new regulations would not otherwise oblige him to do so (because the taxpayer transports non-notifiable products). It is important, however, that if a taxpayer opts for the voluntary declaration option, he must comply with all the rules of EKAER, with one exception, otherwise he may be fined. That exception is the security, since in the case of voluntary declarations, taxpayers do not have to pay a security and thus cannot be penalized for failing to do so.

In the case of road transport of notifiable products, taxpayers are still required to provide a security for their

• Intra-Community acquisitions of products, furthermore
• first domestic supply of goods subject to VAT, not directly to the end user.

However, this obligation shall not apply to products listed in Annex 3 of the Hungarian VAT Act (products with VAT rate of 5% and 18%, e.g. dairy products, fish, other meats, etc.).

There has been no change in the amount of the security: it shall be continuously equal to 15 per cent of the combined, tax exclusive value of the products declared at the time of reporting and of the notifiable products determined during the 45 days preceding the given reporting. For taxpayers failing to do so, EKAER number cannot be issued.

However, the range of taxpayers exempt from security has changed, in addition to the existing categories, companies that are considered reliable taxpayers on the basis of the quarterly rating performed by the tax authority are not required to provide security since 1 January 2021.

In connection with the changes already announced last summer, it was known that the previous 40 percent EKAER default penalty can only be imposed if the taxpayer fails to comply with the EKAER reporting obligation or reports an incorrect quantity or value to the EKAER system. In the case of other, minor errors (e.g. misspellings, failure to close, etc.), legal persons can be fined up to HUF 500 thousand (approx. EUR 1,389), natural persons up to HUF 200 thousand (approx. EUR 555) – per product unit.

When the EKAER sanction system was amended in the summer, it was explained in the explanatory memorandum to the amending law that in the legislator’s terminology one consignor – one consignee – one route – one vehicle is considered as one product unit, and the above mentioned sanction will be based on this. Consequently, companies transporting a large number of notifiable products must continue to exercise extreme caution when submitting their EKAER reports.

Overall, the EKAER regulation, especially the associated administrative burdens have ended on 1 January for many companies. However, taxpayers who continue to transport notifiable (formerly: risky) products can expect more attention from the Hungarian Tax Authority than before, as the attention will be divided towards fewer companies.

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Should you have any further questions about this newsletter, or should you unsure whether your company fully complies with the EKAER rules, VGD Hungary’s tax advisors are gladly at your disposal.