It is a fundamental principle of the European Union’s waste policy that producers, manufacturers should bear the costs of waste management at the end of each product’s life cycle. This scheme is called extended producer responsibility, with the acronym EPR also commonly used in Hungarian to refer to it.

In line with EU principles, the Government Decree on the extended producer responsibility scheme (hereafter: EPR Decree) was promulgated on 14 March 2023. The transformation of the Hungarian waste management system concerns two important segments, the performance of waste management activities and its financing.

Under the new legislation, waste management tasks that are currently the responsibility of the state will in future be carried out by the concession holder. This concession has been granted to MOHU MOL Hulladékgazdálkodási Zrt. (hereinafter: MOHU) for a period of 35 years. In line with the relevant EU directives, the financing of waste management in Hungary will be provided by EPR fees collected from producers and manufacturers.

In the following, we provide a brief summary of the most important details concerning the new EPR fee:

Activities subject to EPR fees

From 1 July 2023, an EPR fee will be charged after “circular economy products” placed on the market by their producers.

As a general rule, placing on the market means:

a) the initial transfer of the ownership of the circular economy product,

aa) in Hungary, weather for free or for consideration, or

ab) transfer from abroad to Hungary as an electronic commercial supply for households or other users,

b) the use of the product for own purposes, and

c) the removal of the product from a VAT warehouse or product charge warehouse to Hungary.

Use for own purpose is defined as the use of a circular economy product primarily for the purposes of the producer or its employees, for R&D, investment, renovation or maintenance, or for any other use, provided that the product becomes waste after such use within Hungary.

Products subject to the EPR fee

The scope of circular economy products concerned is defined in the EPR Decree by way of detailed definitions or by reference to other legislation or different tariff headings. In simple terms, the following are considered to be circular economy products:

1.packaging;

2. certain single-use and other plastic products, such as

2.1 food containers;

2.2 bags made of flexible materials;

2.3 beverage containers with a capacity of 3 litres or less;

2.4 beverage cups;

2.5 lightweight plastic carrier bags;

2.6 wet wipes;

2.7 balloons;

2.8 tobacco products with filters;

2.9 fishing gear;

3. electric appliances and electronic equipment;

4. batteries and accumulators;

5. motor vehicles;

6. tyres;

7. office paper/stationery products;

8. promotional paper products;

9. cooking oil and grease;

10. textile products; and

11. wooden furniture.

The determination of the amount of the EPR fee

The EPR fee will be based on the volume of products placed on the market, multiplied by the EPR fee rates to be set by a separate decree issued by the minister responsible for waste management. At the time of writing, the draft ministerial decree is not yet available, and therefore it is not yet known how much the EPR fee will increase the costs for businesses.

It is important to stress that the environmental product charge (Hungarian acronym: “KTD”) will remain alongside the EPR fee; and in case a company has both an EPR fee and an environmental product charge liability for a product, it can deduct the amount of the EPR fee from the amount of the environmental product charge.

Under the new decree, the scope of circular economy products covered by the EPR scheme and the products subject to the environmental product charge overlap considerably, but they are far from identical. Therefore, the correct classification of products according to the different definitions of the different legal requirements may become a major challenge for economic operators.

A further difficulty may be that while the environmental product charge has to be declared and paid to the National Tax and Customs Administration (NAV) and is also audited by NAV, the powers related to the EPR fee (EPR registration, EPR fee declaration and audit, payment) are shared between the waste management authority (the Pest County Government Office, hereinafter: the Authority) and the concessionaire, i.e. MOHU.

On the basis of the above, the number of companies subject to the EPR fee may be higher than the number of those subject to the environmental product charge system, and the administrative burdens of these companies will increase significantly as a result of the introduction of this new public charge.

 Obligation to register by 31 May

Companies subject to the EPR fee will have to register with the waste management authority by 31 May 2023. Prior to that, however, they will have to provide the information required under Annex 3, point 1 of the EPR Decree on the electronic interface operated by MOHU. Fines may be imposed on those who fail to comply with their obligation to register for the EPR. The amount of such fines is still uncertain, but the Authority will have the power to impose waste management fines on businesses if they fail to comply with their registration obligations despite being called upon to provide the missing information. If a company fails to comply with its registration obligation even after the fine has been imposed, the Authority will suspend the placing on the market of the circular economy product until the missing EPR registration has been completed and the EPR fee has been paid for the circular economy products placed on the market before the registration.

Concession subcontracting by 20 May

For certain circular economy products, there will also be the possibility (in certain cases, obligation) of “individual fulfilment”, which involves the acceptance, recovery and disposal of the waste generated by the product in the circular economy product stream.

Individual fulfilment can be chosen in case of

• electric appliances and electronic equipment,
• motor vehicles, as well as
• industrial or automotive batteries and accumulators.

Producers of products with a deposit on their packaging can only perform their EPR obligations by way of individual fulfilment.

In case of individual fulfilment, a concession subcontract must be concluded with MOHU. The conclusion of such a subcontract can be initiated through the electronic interface operated by MOHU, which process must be concluded by 20 May 2023. The EPR fee payable can then be reduced in case of individual fulfilment by the amount of the specific cost as determined by the Hungarian Energy and Public Utilities Regulatory Office.

Setting up a system of EPR records by 1 July

Obligated parties must set up and operate a system of records in accordance with the requirements of the EPR Decree in such a way that it is suitable for full compliance with the reporting obligations and for ensuring the traceability of the flow of products and wastes in case of an audit.

EPR reporting by the 20th day of the month following the end of the quarter concerned

Businesses concerned must provide the Authority with the information necessary to determine their EPR obligations by the 20th day of the month following the end of each quarter, using the form made available for this purpose by the Authority. The Authority will forward the data received to MOHU by the 25th day of the month after the end of each quarter.

Payment of the EPR fee on the basis of MOHU’s invoice

On the basis of the data received, MOHU will issue an invoice for the amount of the EPR fee for the quarter in question to the businesses concerned, which will then have to pay the EPR fee to MOHU within 15 days of receipt of the invoice.

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If you have any questions regarding the above or need professional assistance in setting up your system of EPR records, Grant Thornton 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.