Act LVI of on Environmental Protection Product Charges and the Environmental Protection Product Charges on Certain Products.

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1 Act LVI of 1995 on Environmental Protection Product Charges and the Environmental Protection Product Charges on Certain Products Chapter I Purpose of the Act Section 1. The purpose of this Act is to contribute to the prevention and mitigation of environmental pollution, to further the efforts aimed at the practical and feasible management of natural resources, and to generate funds to finance the efforts aimed at the prevention and mitigation of potential damage to the environment or any component of the environment that is caused by products - directly or indirectly - during or following the manufacture, distribution or use of the said products as well as to contribute to the prevention or mitigation of environmental pollution. This Act also facilitates compliance with environmental protection regulations for the country and for the market players as specified in Community and Hungarian waste management legislation. Scope Section 2. (1) This Act applies to products subject to product charges and to operations involving products subject to environmental product charges. (2) For the purposes of this Act, products subject to product charges are: a) tires (Chapter II); b) packaging (Chapter III); c) other petroleum products (Chapter V); d) batteries (Chapter VI); e) commercial printing paper (Chapter VIII); f) electric appliances and electronic equipment (Chapter IX). (3) Product charges shall be applied upon the placing on the market or use for own purposes of products subject to product charges (hereinafter referred to as product charges ). (4) The product charges shall be paid by: a) the first distributor or user for own purposes of products subject to product charges in the domestic territory; b) in the case of other petroleum products and commercial printing papers manufactured in the domestic territory, the first buyer of the first domestic distributor; or c) with regard to contract manufacturing, the contract manufacturer of the products subject to product charges [Paragraphs a)-c) hereinafter referred to collectively as obligor ]. (5) Use for own purposes means when products subject to product charges, including if as an ingredient or component of another product or products: a) are applied by the obligor for his own or his employees private use; b) are used under the Accounting Act within the framework of:

2 ba) basic research, bb) applied research, bc) experimental development, bd) improvement, be) renovation, bf) maintenance; c) are destroyed (transformed), or consumed; d) are used for any other purpose not mentioned under Paragraphs a)-c), provided that such use shall not entail the creation of self-constructed assets according to the Accounting Act. (6) In connection with packaging, use for own purposes shall also mean when the product is detached from the packaging. (7) Where products subject to product charges are placed under VAT warehousing arrangements according to the Act on Value Added Tax, or if sold while in storage in the VAT warehouse shall not be deemed to be placing on the market. Assuming Liability for Paying Product Charges Section 2/A. (1) Liability for paying product charges may be assumed as invoiced or under contract, as provided for in the decree adopted for the implementation of this Act. (2) Liability to pay product charges may be assumed from the obligors on the basis of an invoice: a) with respect to packaging, by the domestic manufacturer or distributor that is supplying packaging components under contract to the obligor if it enjoys exemption through the recycling coordinator; and b) with respect to domestically manufactured other petroleum products subject to product charges, by the first domestic distributor. (3) Liability to pay product charges may be assumed - in accordance with Subsection (4) - from the obligor under contract: a) by the first domestic buyer being the exporter of products subject to product charges; b) by the first domestic buyer, if at least sixty per cent of the products subject to product charges purchased from the obligor are exported; c) by contract manufacturers; d) by producer organizations in respect of products subject to product charges if placed on the market through a producer organization, or e) by exempted recycling coordinators. (4) An exempted recycling coordinator may assume the liability for paying product charges from the alternate obligor contracted under Paragraphs a)-d) of Subsection (3). (5) Liability to pay product charges may be assumed under Subsections (3) and (4) by contract only once in respect of any specific product that is subject to product charges. (6) The provisions pertaining to obligors shall also apply to alternate obligors assuming the liability to pay product charges under this Section, with the exception of recycling coordinators. (7) If the contracted alternate obligor referred to in Subsection (3) fails to carry out the liability assumed, liability shall revert to the original obligor. Rules of Procedure During the Payment of Product Charges Section 3. (1) In connection with product charges the relevant provisions of Act XCII of 2003 on the Rules of Taxation (hereinafter referred to as RTA ) shall apply subject to the exceptions set out in this Act. (2)

3 (3) In connection with the proceedings of administrative authorities which are not governed in this Act or the RTA, the Act on the General Rules of Administrative Proceedings shall apply. (4) In connection with product charges the provisions of the Act on the General Rules of Administrative Proceedings pertaining to notices requested by the client concerning the opening of proceedings, if opened upon request, and to reopening procedures shall not apply. (5) Unless otherwise prescribed by law, the declaration, payment, charging, refund and control of product charges is conferred under the competence of the customs authority. Product charges are treated as public debts enforced as taxes. (6) The obligor shall notify the customs authority of any activities in which he is engaged using products subject to product charges for registration in accordance with the specific other legislation on the implementation of the EPPCA. (7) The customs authority shall keep a register of clients based on the customs identification code it assigns (hereinafter referred to as VPID code ) and - with the exception set out in Section 5/F - the Global Location Number (hereinafter referred to as GLN ). (8) In due consideration of what is contained in Subsection (9), the obligor - subject to the exception set out in Section 5/F - shall assess the net amount of product charges on a monthly basis and shall lodge the declaration concerning his liability for paying product charges, and on the related recycling obligation to the customs authority quarterly, using the electronically supported standard form published on the customs authority s official website, by way of electronic means subject to the formal and content requirements set out in specific other legislation. The obligor shall comply with the requirement of declaration of environmental product charges in connection with notified reusable packaging on a yearly basis. (9) Where product charges are assumed by the recycling coordinator the relevant payment obligation shall be notified by the obligor, and compliance with the recycling obligation shall be notified by the recycling coordinator. The recycling coordinator shall file the declaration on the assumed recycling obligation quarterly, by the thirtieth day of the month following the quarter. (10) In connection with the liability to pay product charges and the recycling obligation of an obligor who is placing small quantities of packaging materials on the market that is fully exempted in consequence of the recycling coordinator assuming such obligations, the recycling coordinator shall file the relevant declaration. (11) (12) The customs authority may introduce its own standard forms in connection with the rights and obligation related to product charges, such as for notifications, declarations, data disclosures, formal statements made upon request for correcting tax returns, self-revision, payment of product charges, transfers between accounts, disbursements and product charges account statements. Documents produced on a computer aided program published on the customs authority s official website shall be construed as equivalent to the printed forms prescribed and introduced by the customs authority. (13) The concept of electronic submission shall cover the sending of a standard form produced by the obligor, using his own software, in XML format. The obligor shall send the software he uses to the customs authority for approval in advance. The declaration referred to in this Subsection shall be treated as valid only if prepared with an approved software. (14) The obligor shall file a declaration also if he did not place any product that is subject to product charges into the market, did not use any for own purposes, and if did not incur any liability to pay product charges. Exemption from this obligation is available upon a statement made to the customs authority in which the obligor declares to anticipate no further liability to pay product charges during the remaining part of the year. (15) With the exception set out in Subsection (4) of Section 4 and in Section 5/F, the obligor shall pay the product charges in forints, by the deadline prescribed for filing the declaration, to the account carried by the customs authority as specified by specific other legislation on the implementation of Community customs laws. (16) If the amount of the product charges declared is less than one thousand forints, furthermore, if the outstanding amount of product charges established by way of audit or self-audit in accordance with the RTA is less than one thousand forints, it shall not be paid. The customs authority shall not refund product charges in the amount of less than one thousand forints. Section 4. (1) With the exceptions set out in Subsections (2)-(4), liability to pay product charges shall arise on the date of performance shown on the invoice made out when a product subject to product charges is sold for the first time in

4 the internal market, or on the date when use thereof for own purposes is recorded as an expenditure. (2) In connection with other petroleum products and commercial printing papers, liability to pay product charges shall arise on the date of performance shown on the invoice made out by the first buyer of the first internal distributor, or on the date when use thereof for own purposes is recorded as an expenditure. (3) Liability to pay product charges of the alternate obligor contracted under Paragraphs a)-d) of Subsection (3) of Section 2/A shall arise on the date of performance shown on his invoice, or on the date when use thereof for own purposes is recorded as an expenditure. (4) The obligor s liability for paying product charges for the year shall arise, if having filed a notification to the customs authority by 20 December of the previous year in the case of products subject to product charges and packaging, on the day when the packaging component is shown in the inventory records. The obligor shall not be authorized to alter the time of the opening of his liability for paying product charges within the course of the year to which it pertains. (5) Where Subsection (4) applies, the obligor shall be required to take inventory of the products subject to product charges held on stock on 31 December of the previous year (that shall also function as the opening inventory for the subject year), and shall be required to declare and pay the product charges by 20 January of the subject year based on the rates in effect for that year. (6) If the obligor - once again - establishes the initial day of liability for paying product charges pursuant to Subsection (1) following the application of the provisions of Subsection (4), the obligor shall be required to notify the customs authority to that effect by 20 December of the previous year and to take inventory of the products subject to product charges held on stock on the last day of the year, and shall keep records on these inventoried products separately. The obligor shall not be required to pay product charges on such inventoried products if it has been paid already. Section 4/A. (1) The provisions of the RTA concerning the representation of taxpayers shall apply mutatis mutandis to the representation of obligors. (2) The representatives of obligors must have a continuous power of attorney or authorization in compliance with the RTA to proceed in connection with: a) notification requirements; b) filing declarations; c) requesting certificates; d) refunds of product charges; e) exemption proceedings; f) controls, proceedings of the competent authorities, remedies; g) communication with the recycling coordinator; h) keeping records and registers; i) authorization procedures for deferred payment and other similar payment facilities; j) payment of product charges. (3) The representatives discharging the obligation referred to in Paragraph j) of Subsection (2) shall be subject to joint and several liability with the obligor. (4) If the obligor has established his business or has a fixed establishment in a third country, or, in the absence of such a place of business or fixed establishment, has his permanent address or usually resides in a third country, he must employ a financial representative according to the RTA for the administration of cases related to product charges. Section 4/B. (1) The ministry directed by the minister in charge of environmental protection (hereinafter referred to as Ministry ) shall maintain a register of obligors and other persons involved in discharging product charge related obligations with a view to compliance with product charge related obligations on the basis of their GLN. The customs authority, upon receipt of the GLN, shall assign a VPID code to the client in accordance with Subsection (2) of Section 17 of Act CXXVI of 2003 on the Implementation of Community Customs Laws for identification purposes. (2) The Ministry and the customs authority shall exchange information on a daily basis from their records on

5 identification numbers issued, withdrawn or modified with a view to monitoring waste recovery operations and payment of product charges, as well as the data defined in specific other legislation that they have on record, furthermore, information concerning authorizations and resolutions issued. (3) The customs authority shall process the data contained in the declaration of environmental product charges filed by the obligor in the tax administration proceedings it conducts in connection with processing tax returns, tax collection, refunds and audits, and shall convey this information to the Ministry on a monthly basis. (4) The Ministry shall process the data it receives during authorization procedures and when processing requests for refunds in connection with lubricants, and shall convey this information to the customs authority on a monthly basis. (5) The Ministry and the customs authority may link up by interconnecting their administration systems for the purpose of discharging their duties relating to taxation, control, withholding and enforcement. (6) The customs authority and the environmental protection authority shall have powers to check and verify the data and information contained in the declarations referred to in Subsection (2) either jointly, or separately as part their respective proceedings. (7) The Ministry and the customs authority shall be authorized to process the data mentioned in this Section for a period of eight years from the time of the opening of the obligor s liability for paying product charges. These data shall be erased from the records after this time limit. Enforcement of Product Charges Section 4/C. (1) In order to enforce environmental product charges the customs authority shall have powers: a) to enter and inspect retail outlets, commercial warehouses, goods deposited in retail storage facilities and means of transport, take samples of products for analysis, and to inspect statutory and special records, accounting books, inventories of goods, and the origins and manufacturing of goods; b) to peruse the obligation of invoicing for compliance with the provisions of his Act and the RTA; c) to establish the existence of liability for paying product charges, and compliance with or default of such liability; d) to demand payment of environmental product charges, together with the original copy of the payment order. (2) In the application of Subsection (1), entering the premises and conducting the inspection on site shall be carried out in compliance with the relevant provisions of the RTA pertaining to on-site inspections. (3) The person inspected shall be liable to cooperate with the customs authority in the course of the inspection, and shall provide for the elimination of all obstacles - at his own risk and expense - that may occur during the inspection. (4) If the person inspected refuses to cooperate in the inspection: a) by passively engaging in conduct aiming to block the inspection, the customs authority shall seal off - in the presence of the person inspected, his agent or representative, or failing this in front of two official witnesses - the products subject to product charges and/or the area where products subject to product charges might be found relying on previous information, and shall carry on the inspection once the impediment is remedied; b) by passively engaging in conduct giving rise to suspicion of concealment of products from the liability of paying product charges, the customs authority shall be entitled to take measures to eliminate the obstacles - at the risk and expense of the person inspected - and to continue the inspection proceedings, whereupon the customs authority has powers to enter - in accordance with the provisions of the RTA pertaining to on-site inspections - and search the premises where there is reason to believe based on information received from an identified and reliable source that products subject to product charges are held, stored or produced in violation of the regulations on environmental product charges; c) by actively engaging in any conduct aiming to prevent the inspection, the customs authority shall have powers to use means of coercion in accordance with Act XIX of 2004 on the Customs and Finance Guard. (5) For the identification of persons and goods the customs authority shall be entitled to request data from the following records and registers to the extent necessary to discharge its duties conferred under Subsection (5) of Section 3 of this Act and to verify the information in its possession: a) for the identification of persons, the register of the personal data and address of natural persons, on the basis of the passport number the passport register and the records of the court of registry;

6 b) for the identification of goods and motor vehicles, the register of motor vehicles; c) d) from the register of debtors of the state tax authority; e) from other records and registers under authorization conferred by law. (6) Credit institutions shall furnish financial data free of charge when requested by the customs authority for the purpose of checking the legitimacy of the assessment of product charges, and for monitoring the payment of product charges and non-community taxes and dues. (7) In order to receive data from the agency that maintains the records of personal data and address of citizens, the customs authority shall use an access code that contains personal identification data or a code provided by the agency. Regulatory Control Section 4/D. (1) The following activities may be performed under the customs authority s supervision, subject to its decision of which the obligor must be notified: a) production, storage, transportation and use of products subject to environmental product charges; b) operations involving products subject to environmental product charges until all taxes on the products subject to environmental product charges remaining on stock are paid. (2) Regulatory supervision may be exercised by continuous presence and routine inspections, or by on-site random inspections. (3) The obligor shall take inventory in the presence and under the supervision of the customs authority. The results of the inventory procedure shall be fixed in a report, intended to determine the difference between the quantity of products subject to environmental product charges actually on stock, and the quantity shown in the records. Any difference shall be applied for the closing inventory of the accounting period. (4) The investigation carried out prior to payment of any refund of product charges shall have the same purpose and powers as regulatory oversight. (5) The inspections conducted by the customs authority, as part of regulatory control, shall not be regarded as an audited period within the meaning of the RTA. Legal Measures Section 4/E. Product Charge Penalty Section 4/F. (1) Product charge penalty shall be imposed: a) for any failure to pay product charges in full; b) for unlawfully claiming a refund of product charges. (2) The amount of product charge penalty shall be: a) equal to the full amount unpaid under Paragraph a) of Subsection (1); b) three times the amount of product charges calculated by the rate specified in this Act on the quantity of products subject to product charges in connection with Paragraph b) of Subsection (1). (3) The amount of product charge penalty may be reduced or cancelled ex officio or upon request under special and equitable circumstances if it is evident from the circumstances that the obligor or the recycling coordinator, or their representative, employee, member or agent of competence has acted with due care in the given circumstances. All circumstances of a case shall be taken into consideration when reducing a product charge penalty, particularly the

7 amount owed, the conditions and background of its occurrence, and the gravity and frequency of the perpetrator s unlawful conduct (activity or omission). Default Penalty Section 4/G. (1) The maximum amount of default penalty that may be imposed upon the obligor for any infringement defined in Section 172 of the RTA is double the amount limits specified therein if the infringement pertains to products subject to product charges. (2) In the event of the failure of the obligor or the alternate obligor (assuming the liability to pay product charges) to carry out the obligations set out in Section 4/C according to regulations, the customs authority may impose a default penalty. In the event of any infringement of the obligations laid down in this Act and in other legal regulations implemented by authorization of this Act, that is not sanctioned in Section 172 of the RTA, the customs authority may impose a default penalty of up to 100,000 forints upon private individuals and up to 200,000 forints upon other taxpayers. (3) Before imposing the default penalty the customs authority shall weigh all prevailing circumstances of the case, particularly its gravity and the frequency of the obligor s or recycling coordinator s unlawful conduct (actions or negligence), and whether the obligor or recycling coordinator or his acting representative, employee, member or agent acted with due diligence in the manner expected in the given situation. Upon weighing the circumstances, the customs authority shall impose a penalty that is consistent with the gravity of the offense or refrain from imposing a penalty. (4) In the event of non-compliance with the requirements of keeping records on the part of collection and/or recycling operators, the default penalty imposed shall be double of the default penalty specified in Section 172 of the RTA. Seizure and Confiscation Section 4/H. (1) In the course of proceedings related to products subject to product charges to ascertain the relevant facts of a case, the customs authority may order seizure in order to enforce confiscation as specified in this Act, and shall take measures for the obligor to be present. If the obligor waives his right to be present, or is unable to be present and fails to provide for appropriate representation, the tax authority shall carry out the seizure procedure in the presence of two official witnesses. The customs authority shall record the events of the aforesaid seizure in a report in the presence of the obligor, his agent or representative, or failing this in front of two official witnesses, seal off the products subject to the product charges confiscated, together with any other product of which it is a part or component (hereinafter referred to as seized product ), or remove it from the premises for safeguarding at the expense of the obligor affected. (2) The customs authority shall have powers to seize and confiscate products subject to product charges if the holder of such products - including if held by a natural person in commercial quantities - is unable to produce reliable evidence concerning the origin or purpose of the products in question, and if there is reason to believe that: a) an attempt will be made to conceal the products from the authorities; b) such products will be placed on the market illegally; c) the obligor is on the verge of becoming insolvent; d) any related payment liability will be dishonored; furthermore, if it is necessary so as to ascertain the relevant facts of a case, and shall use the products confiscated, together with the means used for the production, utilization, storage and transportation of such products as physical evidence. (3) The customs authority shall order seizure by way of ruling. The client shall have the right to lodge a compliant against such ruling on the grounds of illegal conduct. The lodgment shall be presented within eight days of the date when the ruling was delivered to the relevant customs authority, and it will be adjudged by the superior body within fifteen days of the date of submission. The seizure shall be carried out irrespective of the compliant.

8 (4) Seizure shall be terminated by way of a ruling: a) if the seized products which are subject to environmental product charges are no longer required for the purposes of the proceeding; b) if the decision adopted in the respective case contains no environmental product charges, product charge penalty or a default penalty; c) with respect to the seized products the environmental product charges, product charge penalty or default penalty imposed, and the costs of transportation, storage and safeguarding of the products in question are paid in the process of ascertaining the relevant facts of the case, or if deferral or payment by installment has been permitted; d) if seizure is to be effected under criminal proceedings launched upon charges of violations of regulations on product charges, and the authority conducting the criminal proceeding has contacted the customs authority to enforce it. (5) Any seized product may be released if the receiving person produces conclusive evidence of ownership, or to the person from whom it was seized if such person is able to produce proof of legitimate possession. (6) If the customs authority is unable to identify the products seized beyond doubt, it shall be identified by expert examination to determine its type and quality. (7) The costs incurred in connection with the transportation, storage and safeguarding of seized products, as well as the costs of the expert inspection shall be borne by the client if sanctioned to pay environmental product charges, product charge penalty or default penalty by final decision. If no penalty is imposed, the said costs shall be borne by the State. (8) As regards the warehouse fees charged for the storage of seized products and the means of production, utilization, storage and transportation in a warehouse operated by the customs authority, a storage fee of 500 forints for each 100 kilograms, or any fraction thereof, shall be paid for each calendar day in storage. If storage takes place in another warehouse, the fees commonly charged by the warehousekeeper shall be applied. Section 4/I. (1) The seized products shall be confiscated if environmental product charges, product charge penalty or default penalty is imposed by final decision in the relevant proceedings, and they are not paid within fifteen days of the due date, furthermore, if the combined total of unpaid charges in connection with the transportation, storage, safeguarding or destruction of any means used for utilization, storage and transportation, that is owned by the client sanctioned to pay environmental product charges, product charge penalty or default penalty by final decision reaches the amount it was worth at the time of seizure. With a view to enforce the payment obligations incurred and to recover the costs of the relevant proceedings, the customs authority shall take measures to have the seized products which are subject to product charges and/or the seized means of activities sold on behalf of the State in accordance with the provisions of enforcement set out in the RTA, or failing this to have them destroyed. (2) Confiscated products shall not be destroyed if the obligor agrees to donate them, subject to approval by the director of the customs authority: a) in connection with any event described as a disaster under specific other legislation, to the head of the competent county or Budapest defense committee, or in connection with any flood control emergency defense alert of the I, II or III degree to the mayor of the community affected or the head of the competent water administration organization; b) subject to the prior consent of the holder of intellectual property rights, to the head of an organization recognized as charitable according to the specific other legislation on the utilization of seized goods for the benefit of the public; c) to the head recycling operator in connection with products subject to product charges, which are considered recyclable waste or that can be used for energy production purposes. (3) Of the confiscated products: a) the ones falling under the scope of Act LXXXII of 2003 on Foods shall be destroyed, if the authority delegated under specific other legislation fails to approve otherwise; b) the products whose sale would violate any intellectual property rights shall be destroyed, if the holder of such rights fails to approve otherwise. (4) The goods seized under Paragraph c) of Subsection (2) of Section 4/H may not be confiscated if deferred payment or other similar payment facilities had been authorized, and if requested within five working days of the original due date. Deferral of payment and other payment facilities may not be authorized on other grounds. (5) The customs authority, after the decision for confiscation is adopted and before it becomes executable, shall be

9 empowered to destroy confiscated products in a preliminary action, if it concerns products which are considered perishable, or if cannot be stored for any extended period of time, or handling, storing or guarding such goods is likely to entail unreasonably high expenses with a view to their value or due to any extensive storage period that may be ultimately required. (6) Confiscation, transfer or destruction in a preliminary action shall be ordered in a ruling. Preferential Product Charges Section 5. The obligor shall pay seventy-five per cent of the product charges on products subject to product charges that are regarded as environmentally friendly under Regulation (EC) No. 1980/2000 and specific other legislation laying down conditions for the eco-label award to products considered environmentally friendly and environmentally safe and are entitled to bear the label 'environmentally safe' (reduced-rate product charge). Refund of Product Charges and Exemptions Section 5/A. (1) Product charges on products prescribed to be procured free of public dues on the basis of a treaty to which the Republic of Hungary is a party may be reclaimed. Documents proving eligibility, as prescribed in specific other legislation, shall be submitted in order to reclaim the charges. (2) Product charges on products that are used, as documented, within the framework of the North Atlantic Treaty Organization Security Development Program may be refunded. The provisions on such refund and on the documents required in verification are set out in a separate legal regulation. (3) Exemption may be granted from the liability to pay product charges - with the exception of other petroleum products and commercial printing papers - if the products affected are recycled from waste by the obligor or the recycling coordinator in the quantity and in the manner specified by the decree adopted for the implementation of this Act, or if they are able to verify the fact that the waste from products subject to product charges have been delivered for recycling, and if able to comply with the requirements set out in the decree adopted for the implementation of this Act. (4) With the exception of recycling coordinators, exemption may be granted for a maximum period of one calendar year and may be renewed each year. Exemption for recycling coordinators may be granted for a maximum period of two calendar years and may be renewed over a ten-year period for two more years per occasion, subject to a procedure prescribed in specific other legislation. (5) Where the declaration is submitted under Subsection (10) of Section 3, the recycling coordinator is required to comply with the recycling obligation in the year when the relevant data has been supplied. (6) In connection with any request of exemption that was submitted beyond the deadline prescribed in specific other legislation, and rejected accordingly, with a view to obtaining exemption from the payment of product charges the obligor may submit a request of special exemption before 30 June of the current year to the minister in charge of environmental protection. The obligor shall be required to pay the prevailing administrative service fee multiplied by a factor of fifteen at the time of submission of the request of special exemption. (7) A request of special exemption under Subsection (6) may be submitted on condition that the obligor is in compliance with the content and formal requirements set out in this Act and in specific other legislation - except for the deadline prescribed for submission - at the time of submission of the request of special exemption. (8) The minister in charge of environmental protection shall have powers to grant exemption to the obligor effective as of the time of submission of the request of special exemption, subject to the following criteria: a) compliance with the conditions set out in Subsections (6)-(7); b) the reason for delayed submission; c) the frequency of missing the deadline specified in Subsection (6); and d) whether the subsequent exemption serves the purpose of:

10 da) prevention and mitigation of environmental pollution; db) prevention and mitigation of potential damage to the environment that is caused by products which are subject to product charges; and dc) efforts aimed at the practical and feasible management of natural resources. Section 5/B. Where the raw material used by an obligor or co-obligor for manufacturing a product subject to product charges is itself subject to product charges, the product charges paid on such a final product may be reclaimed from the customs authority under the conditions and to the extent defined in specific other legislation. Section 5/C. (1) The obligor shall not be liable to pay any product charges on products exported to a foreign country. Product charges paid up may be reclaimed if the products in question are exported to a foreign country, as verified. (2) The domestic buyer may reclaim the product charges he has paid on products purchased from the obligor if the products are built into another product in an unaltered form, or are in an unaltered form and condition and are exported to a foreign country. Refund may be requested in possession of an invoice in proof of purchase, that is to contain the number of the invoice issued by the obligor when the product was placed into the domestic market, the obligor s name, address, tax number, and the rate and amount of the product charges indicated on the invoice issued by the obligor or in its appendix. (3) The obligor is not required to pay the products charges on lubricants, if using these products as basic materials (raw materials). (4) No product charges shall be paid on products imported from a foreign country for a non-commercial purpose by a resident natural person, other than corporate entities, for his own use. (5) No product charges shall be paid on products that are otherwise subject to product charges if made from recycled other petroleum products previously used in Hungary by the R9 process specified in Schedule No. 4 to Act XLIII of 2000 on Waste Management (hereinafter referred to as WMA ). (6) Requests for refund affecting several months may not be consolidated, they shall be submitted on a monthly basis. Section 5/D. Section 5/E. (1) Subject to the terms and conditions provided for in the decree adopted for the implementation of this Act, the obligor shall be authorized to deduct a specific percentage defined under Schedule No. 3 to this Act of the product charge payable on retail packaging, if able to verify compliance with the ceiling rate of recovery provided for in the decree adopted for the implementation of this Act. Compliance with the ceiling rate of recovery may be verified relying on the recycling coordinator s records as well. (2) Subject to the terms and conditions provided for in the decree adopted for the implementation of this Act, the obligor shall be authorized to deduct 100 per cent of the product charge payable on non-reusable retail packaging, if able to verify of having received waste of non-reusable retail packaging for the purpose of recovery or that such waste has in fact been recycled. Compliance with the requirement of recovery may be verified relying on the recycling coordinator s records as well. (3) Subject to the terms and conditions provided for in the decree adopted for the implementation of this Act, the obligor shall be authorized to deduct 100 per cent of the product charge payable on reusable retail packaging, if able to verify that such reusable packaging has in fact been taken back, recycled and re-used in compliance with the prescribed take-back obligation. Flat-Rate Product Charges

11 Section 5/F. (1) Where the obligor is a farmer within the meaning of Council Regulation (EC) No. 73/2009 (hereinafter referred to as farmer ), whose annual revenue reaches the limits specified in Subsections (2) and (3), he shall be liable to pay flat-rate product charges. (2) The flat-rate product charge payable by farmers whose revenue for the previous year has reached ten million forints for the year shall be two thousand forint per annum. (3) The flat-rate product charge payable by farmers whose revenue for the previous year is between ten million and fifty million forints for the year shall be seven thousand forint per annum. (4) The flat-rate product charge payable by farmers who becomes liable to pay product charges in the course of the year shall be five thousand forint per annum. (5) Flat-rate product charges are due and payable by 31 March of the year following the year to which they pertain to the account carried by the customs authority as specified by specific other legislation on the implementation of Community customs laws. Use of the Proceeds from Product Charges Section 6. (1) The customs authority shall transfer the product charges paid up (collected), or that it has recovered to the treasury by the 15th day of the month following the subject month - in due observation of what is contained in Subsection (2) - with a view to the implementation of the objectives of this Act. Any payment received subsequently shall be transferred to the treasury at ten day intervals. (2) With a view to discharge the duties related to products subject to product charges, of the amount of product charges specified in the budget appropriation, the customs authority may use twenty per cent of the sum that is in excess of the said product charges received, collected to cover their operating expenses. (3) The penalties imposed in connection with products subject to product charges shall comprise revenue for the central body of public finances. (4) The customs authority shall show the sum referred to in Subsection (2) under their appropriations for operating expenses. Provisions on Ordering Waste Management Services Section 7. (1) The minister in charge of environmental protection may - subject to the conditions laid down in specific other legislation and financed from the revenues from environmental protection product charges - order waste management services for recycling the waste products specified in Subsection (3) (hereinafter referred to as public service contract ). These services shall be exempt from tax liabilities specified in specific other legislation. (2) Contracts for the above services shall be awarded in compliance with the regulations governing procurement procedures, and shall be published by the 31st of August for the following year. (3) The public service contract shall cover the treatment of the waste products of tires, refrigerators, packaging materials, batteries, and electric appliances and electronic equipment in accordance with specific other legislation. (4) The services may be contracted by the entities engaged in the recycling of the waste products specified in Subsection (3) and by the recycling coordinator (hereinafter referred to as recycling operators ). Section 8. The minister in charge of environmental protection shall supervise compliance with the provisions set out in Subsection (1) of Section 7 on the strength of specific other legislation.

12 Chapter II Environmental Protection Product Charges on Tires Section 9. (1) Product charges shall be paid on the tires of motor vehicles (hereinafter referred to as PCT ). (2) No product charges shall be paid on reconditioned (retreaded) tires by the domestic manufacturer where the tires are reconditioned (retreaded), if the tire product charge has already been paid on the tire that is reconditioned (retreaded). Payment of the product charges shall be substantiated: a) b) if the tire is imported, by the invoice containing the volume imported and the GLN of the supplier, and also by the product charges payment slip if used for own purposes; c) by the invoice containing the volume when purchased/received from a resident enterprise; d) if the tire is collected from a resident natural person, by a declaration from the person in question stating that the tire originates from a non-corporate entity. (3) No product charges shall be paid on any tire retread in the outward processing procedure if the used tire was collected in Hungary. The outward processing operator shall be able to produce admission and exit documents issued by the customs authority of the country in which he is established. (1) The basis for PCT shall be the mass of the tires. (2) The PCT rates are contained in Schedule No. 1. Section 10. Chapter III Environmental Protection Product Charges on Product Packaging Section 11. (1) Product charges shall be paid on product packaging (hereinafter referred to as 'PCPM'). (2)-(4) Section 12. (1) The basis for the PCPM shall be the weight of the packaging. (2) The product charges on composite and combined packaging materials shall be determined: a) by the rate applicable to the various components, if they can be physically separated or detached; b) by the rate applicable to the main component for the whole packaging material, if its components cannot be physically separated and the main component constitutes at least ninety per cent of the whole material; c) by the rate applicable to composite materials if the various components cannot be physically separated and no component constitutes ninety per cent or more of the whole material. (3) The obligor shall pay product charges in connection with packaging - with the exception of retail packaging - calculated on the basis of weight according to Point 1 of Schedule No. 2. (4) The obligor shall pay product charges in connection with retail packaging calculated on the basis of weight according to Point 2 of Schedule No. 2.

13 (5) The PCPM rates are contained in Schedule No. 2. Section 12/A. Section 13. The reusable bottle system prescribed in specific other legislation shall be implemented in harmony with the provisions of this Act. Chapter IV Sections Chapter V Environmental Protection Product Charges on Other Petroleum Products Section 16. Product charges shall be paid on the other crude oil products listed in Schedule No. 5 (hereinafter referred to as 'OPC'). Section 17. (1) The basis of OPC shall be the volume of other crude oil products. (2) The OPC rates are listed in Schedule No. 5. (3) The obligor may reclaim that portion of the OPC on lubricants, under the conditions and to the extent prescribed in other legal regulations, for which he is able to verify the fact that the used or waste lubricants in question have been delivered for recycling or have been recycled. (4) Chapter VI Environmental Protection Product Charges for Batteries Section 18. (1) Product charges shall be paid on battery (hereinafter referred to as 'PCB'). (2) Section 19. (1) The basis of the product charges shall be the mass of the battery.

14 (2) The PCB rates are contained in Schedule No. 6. Chapter VII Environmental Protection Product Charges on Thinners and Solvents Section 19/A. Section 19/B. Chapter VIII Product Charges on Commercial Printing Paper Section 19/C. Product charges shall be paid on commercial printing papers (hereinafter referred to as 'PCP'). Section 19/D. (1) The mass of commercial printing paper shall serve as the basis for the product charges. (2) The PCP rates are contained in Schedule No. 8. Chapter IX Environmental Protection Product Charges on Electric appliances and electronic equipment Section 19/E. (1) Product charges shall be paid on electric appliances and electronic equipment (hereinafter referred to as PCE ). (2) The basis for the PCE shall be the mass of the electric appliances and electronic equipment. (3) The PCE rates are contained in Schedule No. 9. Closing Provisions Section 20. For the purposes of this Act: 1. recovery of substance shall mean the re-use of waste or a component in production or services by way of the

15 processes specified in Paragraphs a) and b) of Subsection (1) and Subsection (2) of Section 18 of the WMA. 2. disposal shall mean the reduction of the impact of the waste on the environment, the abolition or elimination of those of its effects that are hazardous, polluting or harmful to the environment by isolation from the environmental components or by modification of its material character through the application of the methods listed in Schedule No. 3 to the WMA as appropriate; 3. domestic territory shall mean the territory of the Republic of Hungary, including free zones, transit zones and free warehouses; 4. contract manufacturing shall mean the process where products subject to product charges are manufactured by a person established in the Republic of Hungary (contract manufacturer) for a fee on behalf of a customer or his agent (employer) using materials and semi-finished products supplied by the customer without any consideration; 5. packaging shall mean: a) all products used for the containment, protection, handling, delivery and presentation of goods (packaging function), from raw materials to processed goods, from the producer to the user or the consumer; disposable items used for the same purposes shall also be considered to constitute packaging, b) items similar to those referred to in Paragraph a), without prejudice to other functions featured by packaging, except if the item in question forms an integral part of the product and it is necessary for the storage, protection and containment of goods during their entire life cycle, and the various components are intended to be used, consumed or sold as a single unit, c) single-use items designed and intended to be filled at the point of sale, and single-use items used for packaging function, sold or filled at the point of sale, d) additional components and accessories hung on or attached to the product, used for packaging function, except if the item in question forms an integral part of the product and the various components are intended to be used, consumed or sold as a single unit; other components and ingredients incorporated into the packaging shall be deemed to comprise a part of the packaging into which it was incorporated; 6. electric appliances and electronic equipment shall mean any equipment designed for use with maximum 1000 V of alternating current or 1500 V of direct current, commonly utilizing electromagnetic fields or electricity, including the assets used for the generation, metering and transmission of electromagnetic fields or electricity, including the component parts of these appliances and equipment; 7. placing on the market shall mean when a product subject to product charges is sold in Hungary, including if supplied as a constituent or a component for other products; 8. third country shall mean any country that is not a member of the European Community; 9. recovery shall mean the use of waste or any of its components in production or services by applying one of the processes listed in Subsections (1) and (2) of Section 18 of the WMA; 10. recycling coordinator shall mean the organization defined under Section 11 of the WMA; 11. vehicle shall mean an aircraft specified in the act on air transport, as well as motorized land vehicles and tractors, including self-propelled or towed machinery, excluding powered wheelchairs; 12. retail packaging shall mean the following as defined in Annex I of Council Regulation (EEC) No. 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff in effect on 1 January 2009 (hereinafter referred to as Combined Nomenclature ): a) fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter of heading 2009, b) flavored or colored sugar syrups of subheadings , , , , , c) waters for human consumption, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter nor flavored of heading 2201; except ice and snow and water samples for laboratory testing, d) waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored, and other non-alcoholic beverages of heading 2202, not including fruit or vegetable juices of heading 2009 and the products listed under Category I and Category II of Annex I to Commission Regulation (EC) No. 657/2008, e) beer made from malt of heading 2203, f) wine of fresh grapes, including fortified wines; grape must of heading 2204, other than that of heading 2009, g) vermouth and other wine of fresh grapes flavored with plants or aromatic substances of heading 2205, other fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included of heading 2206, undenatured ethyl alcohol of an alcoholic strength by volume of 80 % vol or higher; ethyl alcohol and other spirits, denatured, of any strength of subheading , and undenatured ethyl alcohol of an alcoholic strength by volume of less than