Act CLI of 2021 on amending the Act XLVI of 2008 on the food chain and its official supervision Act XLV of 2020 on the Retail Tax was published in the Hungarian Gazette on 22 December 2021. The legislation introduces food rescue rules for the highest-turnover food retailers and (partly to these company groups) raises the retail tax rate in the top band of the mentioned tax type. In this current, first part of our two-part newsletter, we cover the most important details of the new food rescue rules.

According to the amendment, in order to prevent and reduce food waste, although from 1 February 2022 expired food can still not be placed on the shelves as food (i.e. a product intended for human consumption), however, these products are available for free donation, provided that certain conditions set out in the EC Regulation (EC) No. 852/2004 of the European Parliament and of the Council on the hygiene of foodstuffs are met and in the possession of a so-called FELIR identifier, based on the last year’s amendment to the Regulation.

The best before date indicates the time interval within the food should retain its quality. Unopened food stored in the recommended manner in most cases is still fit for human consumption after its “best before date”, but it may have lost its flavour, odour, or texture.

In contrast, the use by date refers to the time until the food can be consumed safely. In other words, the consumption of expired food unfit for human consumption is, in extreme cases, particularly harmful to human health.

If a food retailer (natural or legal) person, selling daily consumer goods, liable for the payment of the food chain supervision fee (hereinafter referred to as the “Fee”), gained during the calendar year 2021 (i.e., not during its business or tax year) a total net sales revenue (excluding excise duty and public health product tax) of at least HUF 100 billion (approx. EUR 274 million) from its activities underlying the Fee, then

• on the one hand, will be entitled to offer food in its possession for the benefit of a charitable organizations;
• on the other hand, will be obliged to act in accordance with its own food waste reduction plan and offer food placed on its shelves – with a best before date longer than 48 hours – at least 48 hours before the expiry of its best before date to the newly established Food Rescue Centre Nonprofit Limited Liability Company (hereinafter referred to as the “FRC”, or after its Hungarian abbreviation: “ÉMK”).

For food retail companies, who do not achieve the above-mentioned sales revenue, donations to FRC/ÉMK will be voluntary and, of course, these companies will also be eligible to donate to charities (at least 48 hours before the expiry of the best before date).

Thus, according to the amendment, food retail companies with a net turnover of at least HUF 100 billion (approx. EUR 274 million) in 2021 will be obliged to follow the best before date of food with a shelf life of more than 48 hours from 1 February 2022 and before (at least 48 hours) the expiry of this date they will be required to provide the relevant foodstuffs to the FRC/ÉMK free of charge. It is not clear from the wording of the law who can dispose of the food during the last 48 hours of the best before date: the food retailer who has been holding it on the shelves of its shops until then, or the FRC/ÉMK.

FRC/ÉMK will be a 100% state-owned company, over which the ownership rights will be exercised by the food chain supervisory body (currently the National Food Chain Safety Office; abbreviated in Hungarian as “NÉBIH”) on behalf of the Hungarian State. The main task of FRC/ÉMK will be the co-ordination of the food rescue process at the national level, in the framework of which it will, among other things, supervise the food waste reduction plan of the companies obliged to prepare such document (if necessary, FRC/ÉMK will propose amendments to it) and maintain a food rescue database of food rescue organizations.

The food waste reduction plan (hereinafter: “Plan”) is also a novelty, which will be introduced from 1 February 2022. The preparation of such document will be obligatory only for those food retailer companies, that realized a net turnover of at least HUF 100 billion (approx. EUR 274 million) in 2021 (under the conditions already detailed above).

The Plan will have to include the amount of food waste generated at the given company, the amount of reduction to be achieved, and the type and amount of the voluntarily or obligatory food donation.

Failure to prepare the Plan or failure to submit the prepared Plan to the FRC/ÉMK may result in the imposition of the newly established food rescue fine, which the food chain supervisory body will be entitled to levy.

The same fine will be imposed on companies that have submitted a Plan but have found out during the year that the food waste they produce has exceeded the amount set in their Plan by more than 2% per year.

The minimum amount of the food rescue fine will be HUF 15,000 (approx. EUR 41), and the maximum amount will be 0.6% of the Fee for the previous business year. As the amount of the Fee is 0.1% of the previous year’s net sales revenue, the amount of the fine may exceed HUF 600,000 (approx. EUR 1,644) for companies with a turnover of more than HUF 100 billion (approx. EUR 274 million) in 2021 (i.e. for the exclusive subjects of the fine).

The law now passed does not stipulate whether a single payment of the fine will replace the preparation of the Plan for the given year or, on the contrary, the fine may be imposed more than once until the Plan is submitted.

As already mentioned, the new regulation will enter into force on 1 February 2022, so the Plan – for the food retailer obliged to prepare it – shall be prepared and submitted to the FRC/ÉMK for the first time by 31 May 2022.

Based on the above, the changes only apply to companies with a turnover of over HUF 100 billion (approx. EUR 274 million), as a result, they affect only a few, almost without exception, multinational companies and company groups. However, it is not inconceivable that in the future the regulation will be extended to companies with lower turnover.

Should you have any further questions regarding the contents of this newsletter, Grant Thornton’s tax experts are gladly at your disposal.

This newsletter is written on the basis of the information available on the day of its publication and is for general information purposes only, so it does not in any way constitute or replace personal tax advice.