Tax Rebate, Vanishing Frame

Tax Rebate

Hungary introduced a tax rebate in 2004 to incentivize film productions. Since then overall spending on film has increased significantly and Hungary is now among the top countries in the world to host film productions. Films and TV series produced in Hungary are eligible for a 30% rebate based on their expenditure within the country. This program was sanctioned by the European Commission until 2024. The rebate is provided in the form of a cash refund.

Tax Rebate

01/

WHAT PRODUCTIONS CAN BENEFIT?

- - Films of all genres made for cinema release
  - Feature films, series, documentaries and animations made for televisions or other distribution platforms
  - Porn and extreme violent films, commercials, reality shows and daily soap operas and scripted realities are excluded

02/

Cultural test

- - Films applying for the incentive have to be submitted to a cultural test
  - Films must contain European content or cultural values and additional points are granted if EU nationals are either making or financing the movie (point system)
  - 16 points has to be earned to pass

03/

Registration of company and production

- - Hungarian companies, registered with the National Film Office (NFO) are eligible to apply
  - Foreign companies should conclude coproduction or service agreements with Hungarian registered company
  - Production has to be registered at NFO
  - Start of filming has to be reported to NFO

04/

Who provides the financial support?

- - Corporate-tax-paying domestic companies that may reduce their tax payable and tax base by the financial support they provide (double write-off) – a maximum of 7,5% incentive available
  - The financial support is provided in the form of a cash refund (post-financing)
  - Film producing companies can request the support from the collection account of the Hungarian National Film Fund (it may charge a maximum administration fee equal to 2.5% of the subsidy granted)

05/

Eligible expenses

- - All the direct film production costs are eligible except those excluded by the film law; other costs are limited by the law (see below)
  - The producer is free to spend 20% of the budget outside Hungary without suffering a reduction in the amount of the incentive. This means that not only the spend made to Hungarian taxpayers will qualify, but also some of the services provided by foreign taxpayers
  - Up to 20% of the total production budget (consequently 37,5% of the Hungarian spend will be refunded)

06/

Excluded or limited costs

- - Part of copyright costs over 4% of the budget
  - Travel costs are limited to trips from and to Hungary, stopover possible
  - P&A is limited up to 2% of the budget (but max 10m HUF)
  - Cost of services delivered by non-Hungarian sub-contractors limited up to 25% of eligible Hungarian spend
  - Producersʼ fee maximum up to 4%
  - Expenses, where date of the certificate of completion falls out of the production period or it is issued later than 3 months from the end date, are excluded
  - Any expenses settled by compensation (products or services) have to be excluded
  - any costs related to a film produced about an event, are limited to the expenses incurred regarding the production, and not the event. If costs cannot be separated, all expenses should be excluded

07/

HOW MUCH IS THE INCENTIVE?

- - Up to 30% of the eligible production expense (Hungarian or not-Hungarian)
  - The non-Hungarian eligible spend is capped at 25% of the Hungarian eligible spend

08/

AID INTENSITY PROVISIONS TO TAKE INTO ACCOUNT

- - Total state subsidies shall not exceed 50% of the production budget, or
  - In case of co-productions 50% of the Hungarian contribution or 60% of the Hungarian contribution if the co-production involves a co-producer from another EEA Member State too
  - in case of low-budget films, “difficult” audiovisual works and films produced in Hungarian language the extent of subsidies is 100% of the budget or the Hungarian contribution
  - in case of documentaries, animation, shorts, experimental films etc. – 100% of the budget or the Hungarian contribution

09/

OTHER ADVANTAGES

- - Experienced crews
  - Languages spoken
  - Well equipped new studios – sound stages
  - Variety of filming locations
  - Post-production facilities and expertise

10/

IS PRE-FINANCING POSSIBLE?

- - Certain banks are willing to pre-finance state subsidies and VAT
  - Depending on the bank and the individual contract they keep a percentage from the 25% (meaning the actual rebate will be about 20%)
  - Deal with NFO for monthly or quarterly accounting

01/

WHAT PRODUCTIONS CAN BENEFIT?

- - Films of all genres made for cinema release
  - Feature films, series, documentaries and animations made for televisions or other distribution platforms
  - Porn and extreme violent films, commercials, reality shows and daily soap operas and scripted realities are excluded

02/

Cultrual Test

- - Films applying for the incentive have to be submitted to a cultural test
  - Films must contain European content or cultural values and additional points are granted if EU nationals are either making or financing the movie (point system)
  - 16 points has to be earned to pass

03/

REGISTRATION OF COMPANY AND PRODUCTION

- - Hungarian companies, registered with the National Film Office (NFO) are eligible to apply
  - Foreign companies should conclude coproduction or service agreements with Hungarian registered company
  - Production has to be registered at NFO
  - Start of filming has to be reported to NFO

04/

WHO PROVIDES THE FINANCIAL SUPPORT?

- - Corporate-tax-paying domestic companies that may reduce their tax payable and tax base by the financial support they provide (double write-off) – a maximum of 7,5% incentive available
  - The financial support is provided in the form of a cash refund (post-financing)
  - Film producing companies can request the support from the collection account of the Hungarian National Film Fund (it may charge a maximum administration fee equal to 2.5% of the subsidy granted)

05/