The recently published Government Decree No. 320/2023. (VII. 17.) has introduced two new payment obligations for operators of facilities that receive a significant amount of free emission allowances. The payment obligations are already applicable in 2023.
Operators of facilities that benefit from a significant amount of free emission allowances are operators whose facilities:
Accordingly, the new payment obligation applies to facilities that had average annual emissions of more than 10,000 tonnes in the above periods and were allocated a free quota of at least half their average annual emissions.
The tax base is the amount of tCO2 emissions of the operator of the facility that receives a significant amount of free emission allowance, determined in accordance with Act CCVII of 2012.
The tax rate is the HUF equivalent of EUR 40/tCO2.
Taxable persons must pay quarterly tax advances – in the amount of the tax calculated for the tax base in the quarter concerned – and indicate the amount of these tax advances in their tax returns.
Annual tax returns on the CO2 quota tax must be submitted to the tax authority for each tax year, by 31 May of the year following the tax year. The total of tax advances must be topped up to the actual tax liability by this date. If the amount of advances that taxable persons have paid exceeds the amount of their annual tax liability, they may request a refund in their annual returns.
The tax liability applies retrospectively to the entire tax year starting after 31 December 2022. The tax advances for the first, second, and third quarters of the 2023 tax year must be declared and paid by the 15th day of the month following the third quarter.
The tax base may be reduced by 50% in the tax return on the basis of the taxable person's verified emission report for the current year, if the following conditions are met:
So, the tax base may be reduced if the taxable person has achieved an actual CO2 emission reduction of 2.2% in 2023 and 4.3% from 2024, while maintaining its capacities and production volume.
From 2023, the sale of free quotas will also be subject to payment of a fee: operators of facilities receiving a significant amount of free emission allowances will have to pay a transaction fee for the transfer of free CO2 quotas.
The transaction fee is 10%, calculated on the basis of the EEX-EUA stock market price valid on the date on which the free quota is transferred as part of the transaction or on the last stock exchange trading day preceding that date and the daily mean exchange rate quoted by the National Bank of Hungary.
Operators must report transactions subject to the transaction fee to the authority responsible for climate protection within 10 days following the date on which such transactions were conducted. The authority responsible for climate protection will send a statement on the transaction fee liability, which the operator must pay within 30 days.
The first and most important step in relation to the new obligations is to determine whether the entity meets the definition of a taxable person, that is, to what extent it has been allocated free emission allowances and how much its verified CO2 emission was.
The entities concerned should consider the following options:
If you have any questions regarding the above, please contact our colleagues below.
László Deák
Partner
Email: laszlo.deak@pwc.com
Gábor Farkas
Partner
Email: gabor.farkas@pwc.com
Barbara Koncz
Partner
Email: barbara.koncz@pwc.com
Balázs Szük
Senior Manager
Email: balazs.szuk@pwc.com