The Hungarian Government promulgated the Extended Producer Responsibility Decree – what are the most urgent tasks now?

In previous newsletters (available here, here and here ), we have already commented on the expected introduction of an extended producer’s responsibility system, which will represent a significant change from the current approach to environmental product charges („green taxes”). The detailed rules could be known from a draft decree submitted for public consultation until the final text (Government Decree 80/2023 (III.14.) on the Detailed Rules of the Extended Producer Responsibility Scheme) was published recently.

In this newsletter we outline the most important parts of the Extended Producer Responsibility (“EPR”) scheme, paying particular attention to the provisions that have changed compared to the draft.

What are the most urgent actions to be taken by businesses?

Companies must check whether they qualify as a "producer", i.e. the manufacturer, first domestic distributor, etc. of the products in the scope of the EPR system. If the company was liable to the environmental product charge (“green tax”), it is likely to be covered by the EPR scheme, too.

If the company is liable to the EPR fee, it should apply for registration with the Hungarian Waste Management Authority from 1 May 2023 at the earliest and by 31 May 2023 at the latest (the deadline has been postponed compared to the draft decree). The company also declares whether it will meet its EPR obligations through collective performance or individual performance. Prior to submitting the application for registration, but after 1 April 2023, the company should register on the electronic interface operated by the concession company (MOHU MOL Waste Management Close Company Limited by Shares, hereinafter "MOHU") by providing the data specified in the decree.

Failure to register is sanctioned by a waste management fine imposed by the Hungarian Waste Management Authority. If the company still fails to comply with the registration obligation, the Authority will suspend the placing on the market of the circular product.

To ensure that EPR obligations are met from 1 July 2023, companies will need to determine an 8-digit circular code ("KF code"), configure their invoicing software accordingly and develop a record-keeping system with data content that complies with the EPR rules.

What triggers the obligation to pay the EPR fee?

The obligation is triggered when the circular products are placed on the domestic market by the producer. Let us take a closer look at how these concepts should be interpreted.

The producer is the entity that manufactures the product and, if the product is not manufactured in Hungary, the entity that first places the product on the market in Hungary in the course of their economic activity.

Placing on the market should be understood as follows:

• where ownership of the circular product:

                   -is being transferred free or for consideration for the first time in the territory of Hungary, or

                  -is being transferred from abroad to the territory of Hungary within the framework of the e-commerce service (e.g. online shops) to domestic households or other users,

including the transfer of ownership as an accessory or component part of other goods (exceptions apply);

• where final use for own purposes takes place, or
• where the circular products are released from the VAT warehouse or from the environmental product charge warehouse to the territory of Hungary.

Circular products: the main categories of circular products have remained unchanged compared to the draft (see listed here ). There is also no change to the fact that circular products that are also subject to the green tax will be taxed only once: the EPR charge will be deductible from the green tax.

How to meet EPR obligations by collective performance?

In the case of collective performance, the obligations are as follows:

• the company should keep records of the circular products it places on the market, with the required data content (retention period: at least 5 years);
• the invoices (or a substitute document) issued to the customer should indicate the KF code of the circular product, the relevant EPR tariff, the amount of the EPR fee and the required clause;
• quarterly - by the 20th day of the month following the current quarter – the company should submit a data report to the Hungarian Waste Management Authority on the basis of the records it keeps. The Authority will forward the data to MOHU within 5 days);
• MOHU as the concession company will issue an invoice to the company for the EPR fee due, payable within 15 days of receipt.

In the case of individual performance, the EPR obligations are different from the above.

Other important things to know

• An Energy Ministry Decree will be promulgated containing the EPR tariffs applicable to collective performance;
• In some cases, the buyer can take over the EPR obligations from the producer;
• Circular products exported from Hungary to other countries may be exempt from the EPR fee;
• The decision on how to perform the EPR obligations - collectively or individually - can be changed later.  Collective performance may be changed to individual performance once a year, by 30 November of the year preceding the current year; while individual performance may be changed to the collective performance by the 1st day of the month preceding the current quarter;
• A producer (e.g. an online shop) established abroad and placing a circular product on the Hungarian market within the framework of the e-commerce service may fulfil its EPR obligations only through an authorised representative;

Services of VGD Hungary

Our experts can ease the administrative burden for businesses with the following services:

• identification of circular products and determining the 8-digit circular (“KF”) codes based on the data provided by the customer;
• registration support to the Hungarian Waste Management Authority;
• advising on the configuration of invoicing software, exemptions from the EPR fee, exceptions to the EPR obligation, and record-keeping obligations.
• liaising with the Hungarian Waste Management Authority and supporting possible inspections by the authorities.

28. March, 2023

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Should you have any questions regarding this newsletter, the tax experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute tax advice