The form (23KTBEV) used for submitting environmental product tax declarations, managed by the state tax authority (NAV), was updated last week. The form now includes the regulatory changes related to the Extended Producer Responsibility (EPR) legislation effective from 1 July 2023. Since the publication of the EPR rules, there has been a question about how the tax declaration would offset the EPR fees against the environmental product tax obligations. Well, we now have the answer.
In our previous articles, we have already discussed the introduction of the EPR system on July 1, 2023, and the related payment and administrative obligations. The first quarterly reporting period ended in September and the October 20, 2023, reporting deadline is approaching. Due to extremely high EPR fees, many are currently focused on designing the EPR data submission, but it is also worth concurrently dealing with the Environmental Product Tax, as the new product tax declaration must be submitted to the tax authorities by the same deadline. The tax authority updated the environmental product tax declaration form template on its website last week, making it possible to test the EPR and the environmental product tax offsetting mechanism in practice.
What does the legislation say?
According to the Environmental Product Fee Act (Act LXXXV of 2011), the product fee liability must be reduced by the EPR fee applicable on the product or material flow on the first day of the product tax determination period, while for packaging materials, it should be reduced by the EPR fee payable for the packaging produced form it (assuming collective compliance and that the product falls under both EPR and product tax obligations).
So, in general, the law requires offsetting regardless of whether the EPR fee has been paid to the concessionaire or not. The legislative intent is clear: EPR verification is not the responsibility of the tax authority but that of the waste management authority. The tax authority lacks the means to verify the prepayment of EPR obligations. Therefore, it is obligatory to reduce the product tax liability with the currently applicable EPR fee.
What do we see in the product fee declaration?
The draft declaration published by the state tax authority last week contains a twist compared to the above general and simplifying approach: taxpayers must indicate in the return when entering the KT/CsK codes, whether they wish to submit their return on the basis of the normal rates of product charge liability at zero HUF.
The instructions for completing the product charge return explain the above turn of phrase in a concise manner, stating that the list of KT and CsK codes to be selected includes the product charge item to be paid in addition to the description of each code. “The code should be selected according to whether the extended producer responsibility fee (EPR fee) has been paid. […] If the obligation arises for a domestic placing on the market and the EPR fee has been paid by the obligor, the code with the obligation to pay of HUF 0 should be selected.”
From the above wording, it would therefore seem that the product fee return does not automatically apply the zero HUF product fee rate in the case of overlapping product scope, and taxpayers must examine the fulfillment of the condition of payment on a case-by-case basis.
Moreover, this solution raises further questions: how can a taxpayer guarantee the payment of the EPR fee if the due date for payment of the EPR fee for a given period falls later than the due date for the product fee, and in more than one case (for example, in the case of packaging products) another person is liable for payment under EPR and product fee systems?