On 19 June 2023, the Ministry of Energy published on its website a proposal to amend the Extended Producer Responsibility (EPR) decree, which would – effective from 1 July 2023 – fundamentally change the rules applicable to EPR that are also effective from 1 July 2023. In the following, we will examine the main points of the EPR proposal.

The scope of the EPR

A rather unusual legislative situation emerged in connection with the EPR. The legal institution itself was introduced into the Hungarian legal system by Government Decree 80/2023 on the detailed rules of the extended producer responsibility system  (hereinafter: the “EPR Decree”), which was promulgated on 14 March 2023, but several provisions were only scheduled to enter into force from 1 July. The proposal to amend the rules of the EPR decree (hereinafter: “Proposal”) was published on the website of the Ministry of the Ministry of Energy on 19 June, and partially contains amendments to the EPR decree also from 1 July.

The Proposal clarifies the definition of circular products. It would exclude from the EPR payment obligations for consumer packaging that is in direct contact with a medicine and that is considered pharmaceutical waste.

EPR obligation for point-of-sale refill packaging

According to the text of the currently known EPR decree, after 1 July 2023, the first domestic placing on the market of packaging will, in principle, create an EPR payment obligation, but the first domestic placing on the market of packaging materials itself will not be subject to the EPR.

The EPR decree defines packaging as items used to contain, preserve, transfer, receive, transport, etc. a product. In other words, packaging materials (e.g. a foil, box, carton) are not, in principle, subject to EPR until it is used for a product and become packaging.

However, the current EPR decree contains an exception for packaging designed and intended to be filled at the point of sale to the consumer. Accordingly, an EPR obligation arises for the party who sells the packaging material for filling at the point of sale to the packager for the consumers.

The Proposal would also introduce a substantial change to the above exception: the first entity to place such point-of-sale refilling packaging products on the domestic market would be the first party subject to the EPR.

As a result of the amendment, the first domestic marketer of packaging would have to know whether or not each packaging product it places on the market would be used for filling at the point of sale. This could create difficulties for manufacturers and distributors of packaging products, simply because the EPR decree does not otherwise define packaging products designed and intended to be filled at the point of sale to the consumer.

Given that the identity of the party liable to pay the EPR would change in relation to packaging intended to be filled at the point of sale, the Proposal would give new tax subjects the opportunity to legally fulfil their EPR registration obligations until 31 July 2023.

Assumption of EPR liability

As mentioned in our previous newsletter, the assumption of the EPR liability by the manufacturer is only available for certain motor vehicle parts. In this respect, the Proposal stipulates that, in the case of assumption of the EPR liability for such parts, the manufacturer would have the option pay a flat EPR rate, and the decision of the vehicle manufacturer to use this option could not be changed within the year concerned.

However, under the Proposal, in the case of a circular product placed on the market through a farmers’ organisation, the latter would also be able to assume the EPR liability for circular products.

Since the legal title for the assumption of the EPR liability would be extended as described above, the Proposal would require the contract of assumption to include (in addition to the names, registered addresses, tax numbers of the contracting parties, as well as the name and the code of the circular product), also the legal reference (section number) on the basis of which the assumption would take place.

According to the Proposal, it would not be sufficient for the contract of assumption to show the starting date of the assumption, but would have to show the term of the assumption.

EPR declaration

Under the currently promulgated text of the EPR decree, no EPR fee is payable if the purchaser liable to pay declares that at least 60% of the circular product purchased is exported abroad, either separately or as a certified component of another product.

Under the proposal, 60% of the quantity of the circular product purchased in the quarter concerned must be certified as being exported within a maximum of 365 days from the last day of the quarter concerned. Otherwise, the declarant would become liable to pay the EPR fee on the 366th day, according to the rules in force on the day the liability arises.

The Proposal would broaden the scope of those exempted on the basis of a declaration such as the above: such obligees would also be exempted from paying the EPR where the purchaser declares that it uses the purchased cooking oil as a direct input for the manufacture of another product, whereby the cooking oil is incorporated into the manufactured product in accordance with the technological process.

Specific rules for reusable packaging

Originally, the EPR decree did not contain specific provisions for packaging made from reusable packaging materials.

However, on the basis of the Proposal it would be clarified that such packaging would only be subject to the EPR once: when it is placed on the domestic market for the first time. Any further sale or use of such packaging would be exempt from EPR.

However, it is important to stress that, according to the text of the Proposal, the former special rule would only apply if the reusable packaging used to create the packaging is entered in the register of reusable packaging maintained by the national waste management authority.

The Proposal would also clarify that in the case of use of a circular product for own purposes, if neither the date of charging as a expense nor the date of performance of the transaction can be established, the EPR obligation would arise on the date when the circular product becomes waste. In the case of packaging imported from abroad, this would also include the date on which the foreign packaging is finally dismantled, i.e. the date on which it becomes waste.

EPR obligation after taking goods into stock

The product charge legislation has already provided for the possibility that, at the option of the entity liable to pay the product charge, the obligation arises at the time when the goods subject to the product charge is taken into stock, rather than at the time of the first domestic placing on the market or first use for own purposes.

In the EPR system, however, the law has not so far provided for such a choice: according to the original EPR Decree, the liability arises at the time of the first domestic placing of the circular product on the market or the first use for own purposes.

However, under the Proposal, the option to pay the EPR after taking the goods into stock would also become available. The date of taking into stock in the case of the acquisition of goods would in principle be the date of performance indicated on the invoice for the acquisition of the goods or the date on which the goods are entered in the accounting records as an asset.

In the case of the option to pay the EPR after taking into stock, the EPR liability would in any case arise on that date. As a result of the proposed change, the time when the product charge and the EPR liability arise would be harmonised in case of many taxpayers who have previously made use of this option in case of the product charge.

Under the Proposal, those who use this option of taking goods into stock would not be able to change their decision within the current quarter.

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Many of the provisions of the EPR decree entered into force on 1 July 2023, but as can be seen above, some points of the regulation must be already reconsidered by the companies concerned. If you have any further questions about the provisions of the EPR decree or the proposed amendments to it, or if you are unsure how your company would be affected by the proposed changes, Grant Thornton’s tax experts are ready to help you and your company!

This newsletter is based on the information available at the date of its publication and is written for general information purposes only; therefore, it does not constitute or replace personalised tax advice in any respect.