We are used to legal regulations changing every year, and legislation on the environmental product charge is no exception either. Yet if we take a look at the environmental product charge legislation effective as at 1 January 2014, it is immediately clear that there are no fundamental changes this year. Definitions are now worded more precisely and in some cases supplemented to facilitate a standard legal interpretation. As part of this, definitions pertaining to distribution, commercial packaging, use for own purposes and advertisement paper have been worded more accurately. Looking at the amendments it is also important to mention that regulations on chain transactions were re-introduced, while the institution of an environmental product charge warehouse will be rolled out from 1 July 2014.
Distribution – foreign taxpayers with a VAT number in Hungary
Based on the previous regulation, in the case of taxpayers registered exclusively for value added tax purposes to import products from abroad and sell the same in Hungary, it was unclear whether they qualify as the first distributor on the domestic market and, as a result, whether they are obliged to pay the environmental product charge. The legislator removed this legal uncertainty by adding a sub-section to the definition of distribution, which pertains to taxpayers registered expressly for VAT purposes. The new definition now clarifies that if VAT-registered entities sell products subject to the environmental product charge in Hungary in a manner that the product delivered is considered to be in Hungary when received as a parcel or when the shipping is completed, this shall qualify as distribution, giving rise to an environmental product charge payment obligation at the VAT-registered taxpayer.
Chain transaction regulations
Under the new legislation, there is no obligation to pay the environmental product charge if a domestic product subject to the environmental product charge is sold to another domestic taxpayer, whereby the first distributor has the product shipped, or delivered by mail, to a foreign destination and the product is verified as having been delivered abroad.
Environmental product charge warehouse
From 1 July this year, legislative amendments permit the establishment of an industrial or commercial environmental product charge warehouse. Only domestic property whose operation is authorised in advanced by the Tax Authority may potentially be used for both types of warehouse.
The basic idea behind the environmental product charge warehouse is to store products subject to the environmental product charge at a price net of such charge, and that sales within the storage facility do not give rise to an environmental product charge payment obligation either. Furthermore, products subject to the environmental product charge may be stored in the warehouse without paying said charge, and products sold from such warehouses to foreign countries do not generate an obligation to pay the product charge. Only when removing the product from the warehouse for domestic purposes does the given entity incur an environmental product charge payment obligation. Another key advantage of environmental product charge warehouses is that the environmental product charge on stored products, whose sale abroad from the warehouse only weeks or months later has been verified, may be reclaimed as early as the date such products are stored in the warehouse, because in accordance with product charge regulations, putting a product into the warehouse is treated the same as delivering or selling such products abroad in terms of reclaiming the product charge.