Significantly increasing administrative burdens, state pre-emption right and 90% severance tax (mining fee) for certain building materials
A prior notification requirement will apply to the export of certain goods used in building construction from Hungary, in connection with which the Hungarian State can also enforce a pre-emption right. In addition, the scope of the EKAER notification has been extended with a number of building materials, and an additional severance tax (also referred to as “mining fee”) at a rate of 90% will apply to the extra profit on certain building materials.
Mandatory notification before exporting:
Certain raw materials and products used in the construction industry (e.g.: gravel, aggregates, stone, certain cements, mortars, concretes and similar products, as well as certain iron, steel and gypsum products, etc.) can be sold or delivered for other purposes from Hungary only after prior notification to the minister responsible for the national economy. Pre-notification must be made first for export deliveries after 16 July 2021. From the above date, the Hungarian State may also enforce a pre-emption right or purchase option for building materials subject to the notification.
The list of building materials subject to the notification requirement prior to export, in respect of which the Hungarian State may exercise its pre-emption right or purchase options, is set out in the annex to Government Decree 402/2021 (VII. 8.).
The notification must include, among other things, the details of the notifier, the specification of the building material, its quantitative indicators, the price set in the contract, or in the absence of a contractual price, the current market value of the building material, the data necessary for the identification of the vehicle transporting the building materials, and the planned place of border crossing.
The pre-export notification must be accompanied by a copy of the sales contract or the accepted offer, as well as the invoice (if already issued) for the sale of building materials abroad. In the case of both sale and export for other purposes, the notification must be accompanied by a copy of the contract relating to the transport of the goods and other documents evidencing the delivery. If the above documents are issued in a language other than Hungarian, a certified Hungarian translation must accompany the notification.
The goods concerned may be lawfully sold or exported from the territory of Hungary only if the Hungarian State does not exercise its pre-emption right in connection with the prior notification, and the minister responsible for the national economy confirms to the notifier the acknowledgement of the notification. The confirmation must be sent by the minister within 10 working days after receipt of the notification if the Hungarian State does not wish to exercise its pre-emption right. Therefore, the notification should be made at least 10 working days in advance for the delivery to be lawful.
In the event of failure to give notification prior to exporting, the police and the customs authority may order the sequestration of the building materials, as well as impose a fine of up to HUF 5 million. The Hungarian State has a purchase option for the building materials subject to sequestration.
The obligation of prior notification related to the exporting of the building materials from Hungary applies only during the period of emergency ordered due to the coronavirus pandemic.
In addition, as of 9 July 2021, the EKAER obligation will apply to the intra-Community acquisition or sale, to the importing to or exporting from the territory of Hungary for other purposes, as well as to the sale to the first non-end user in Hungary subject to VAT, of certain construction raw materials and products (e.g. wooden planks and other timber products, as well as gravel, aggregates, stone, certain cements, mortars, concretes and similar products, as well as certain iron and steel products, etc.), in so far as it is linked to transport by motor vehicles on public roads.
The EKAER exemption related to weight and value limits can also be applied in the case of building materials, which means that no EKAER notification is necessary in respect of transactions involving road transport by the same dispatcher to the same recipient and using the same vehicle that are below the limits of HUF 1 million in value and 500 kg of gross weight.
The full list of products subject to EKAER notification is set out in the annex to Government Decree 403/2021 (VII. 8.). (It should be noted that the scope of building materials subject to EKAER is not entirely the same as the scope of building materials that are subject to the mandatory notification before exporting, in connection with which the Hungarian State may also exercise its pre-emption right or purchase option.)
Unlike in case of goods inherent with risk, an EKAER risk deposit is not required for building materials. Under the current legislation, construction products will only become subject to EKAER temporarily until the end of the state of emergency due to the coronavirus pandemic.
Additional severance tax
As of 9 July 2021, an additional severance tax at the rate of 90% will be levied on companies:
- that are required to pay a severance tax, and
- whose principal activity in 2019 was the mining and production of certain products (mining of stone, gypsum, chalk, gravel, sand and clay, as well as the manufacture of cement, lime and gypsum), and
- whose net turnover in 2019 exceeded HUF 3 billion, and
- whose products (either extracted or processed) used as building materials are sold at a net consideration above the net price set by the Hungarian Government.
Thus, the 90% additional severance tax is to be paid by the companies fulfilling the above conditions after the positive difference between the actual net sale price and the net price set by the Government. In this respect, the Hungarian Government has set net prices for the following building materials:
- graded sand: HUF 700/metric ton,
- graded gravel: HUF 900/metric ton,
- graded sandy gravel: HUF 700/metric ton,
- natural sandy gravel: HUF 700/metric ton,
- cement: HUF 20,000/metric ton.
The additional severance tax is to be paid in Hungarian forints, monthly, by the 15th day of the month following the reference month. If the amount was not determined in Hungarian forints, then the official medium exchange rate of the Central Bank of Hungary, valid on the date of the invoice or other accounting voucher, must be used for determining the basis and the amount of the additional severance tax.
Under the new legislation, undertakings that are not obliged to pay an additional severance tax of 90 % but are engaged in the sale of the above construction products are also obliged to set a price for a fair profit, taking into account the prices set by the government referred to above.
Under the current provisions of law, the obligation to pay the additional severance tax will also apply only during the state of emergency ordered due to the coronavirus pandemic.
We hope that you found the above summary useful. If you have any further questions in connection with this topic, we are at your disposal.