Significant changes to environmental protection product fee regulation from July 2023

The introduction of extended producer liability will bring important changes to the environmental protection product fee regime.

A bill on the amendment of certain acts relating to waste management has been submitted to Parliament, including the planned amendment of Act LXXXV of 2011 on the Environmental Protection Product Fee (“EPFA”). From 1 July 2023, the amendments will fundamentally change environmental protection product fee payment obligations in terms of the extended producer liability to be regulated by Act CLXXXV of 2012 on waste, and the specific government decree, which will impose additional obligations on a wide range of operators.

Major changes to the product fee regulation:  

• As a result of a change in the definition of placing on the market, distance selling by foreign online stores to Hungary will also qualify as a domestic sale subject to product fee.
• The regulatory changes in waste management will no longer make it possible for operators to fulfil the product fee payment obligation as individual waste managers.
• There will be a slight change in the range of products subject to product fee: Annex 1 to the EPFA, which lists the products subject to product fee, has been supplemented by the tariff headings for solar panels (i.e. photovoltaic panels) and disposable electronic tobacco products.
• The tariff classification of products subject to product fee must be based on the classification rules “in force on 1 January of the year preceding the current year”, rather than those in force in the current year.

The planned amendment to the Waste Act, and the government decree on the introduction of extended producer liability, currently under public consultation, will have an impact on environmental protection product fee payment obligations as follows:

• There is a significant overlap between the product categories subject to the environmental protection product fee and those subject to extended producer liability (electrical and electronic equipment, tyres, batteries, office paper, and paper-based advertising materials). However, there are also differences between the product categories covered by the two regulations: other plastic and other chemical products are subject to product fee only, while wooden furniture, certain textiles, baking oil and fat are subject to the extended producer liability only. The extended producer liability applies to motor vehicles, while under the product fee regime product fee is payable on certain motor vehicle components that are subject to the product fee.
• It is a significant difference that the product fee regulation imposes a payment obligation on packaging materials, whereas the extended producer liability applies to packaging.
• Manufacturers subject to the extended producer liability will be required to pay an extended producer liability fee for placing the products concerned on the market, which will be deductible from the environmental protection product fee. 

An analysis of the changing product fee rules and the extended producer liability rules to be introduced raises a number of questions.

• In contrast to the product fee legislation, the draft legislation does not list the products subject to the extended producer liability by tariff heading. Therefore, it may be more difficult to establish whether the extended producer liability applies to a product. The classification differences may also result in only one obligation (product fee or extended producer liability) imposed on specific products despite the fact that the specific product group is subject to both regulations.
• In certain cases, the environmental protection product fee legislation provides for exemptions from payment of the product fee. Such exemptions may apply, for example, to products transported abroad in a distribution chain (on the basis of a reclaim, takeover or special exemption rule) or to reusable packaging materials. However, the extended producer liability scheme does not provide for similar exemption rights for producers. Consequently, there may be cases in which the extended producer liability fee must be paid but no product fee payment liability arises.
• The product fee scheme imposes a tax on packaging materials when first placed on the domestic market, whereas the extended producer liability scheme applies to packaging. Therefore, these products may be subject to a double charge: the producer of the packaging material will have to pay the product fee when selling the packaging materials in Hungary, and the purchaser, who uses these materials for packaging, will have to pay an extended producer liability fee.

Based on the draft legislation, operators’ administrative obligations (e.g. registration, record-keeping, quarterly reporting, payment of fees) will certainly be twofold in the future, as they will have their current product fee obligations and additional obligations resulting from the extended producer liability scheme.

It may be worth exploring whether there is a way to automate the administrative tasks imposed by the two regulations, including the calculation of fees and the inclusion of the extended producer liability fee in the calculation of the product fee.

László Deák 
Partner 
Email: laszlo.deak@pwc.com

Gábor Farkas 
Partner 
Email: gabor.farkas@pwc.com

Balázs Szük 
Senior Manager 
Email: balazs.szuk@pwc.com