Financial benefits of filming in Hungary

 

 

 

What is the benefit called?    Tax relief system

 

 

How much is the benefit?

 

The benefit is up to 20% of the eligible production expense, which consist of two elements: 

1.) HUNGARIAN ELIGIBLE SPEND AND 2.) NON-HUNGARIAN ELIGIBLE SPEND. THE NON-HUNGARIAN ELGIBLE SPEND IS CAPPED AT 25 % OF THE HUNGARIAN ELIGIBLE SPEND. It is in the form of a cash rebate.

 

 

If the benefit is based on "location spend" what exactly does "location spend" mean? 

 

The eligible local expense (subject to the 20% rebate) is any payment which has been made to Hungarian taxpayers in relation to the production of any film registered by the National Film Office of Hungary.

 

IN ADDITION TO THAT FURTHER 25 % OF THE ELIGIBLE LOCAL EXPENSE CAN BE ADDED TO THE TOTAL ELIGIBLE PRODUCTION EXPENSES BY THE HUNGARIAN PRODUCTION COMPANY MAKING PAYMENTS TO FOREIGN CREW MEMBERS OR SUBCONTRACTORS ACCORDING TO THE REGISTERED BUDGET OF THE FILM.

 

There are certain RESTRICTIONS such as FEES FOR copyright ARE CAPPED AT 4 % OF THE BUDGET or travel fare without Hungarian destination ARE EXCLUDED.

 

Does local spend include the following? 

 

Foreigners working in Hungary?

 

In cases when EITHER the foreign individual pays their personal income tax in Hungary OR THE AMOUNT OF THAT SPEND DOES NOT EXCEED 25 % OF THE HUNGARIAN LOCAL SPEND .

Finance Fees? Yes

Bond Fees? Yes

Per diems? No
 

 

General

 

Eligibility - who can access the relief? 

 

Production companies registered by the National Film Office of Hungary can access the relief for feature films, television films, television series or miniseries (excluding sit-coms, daily soaps, reality shows), animation and documentaries produced or co-produced by them.

 

How does the mechanism work and what is the process? 

 

THE FILM NEEDS TO PASS CULTURAL TEST.

16 POINTS OUT OF 32 NEEDS TO BE REACHED SCORING AT LEAST 2 POINTS OUT OF 8 IN THE CULTURAL CRITERIA SECTION. THEN PASSING THE TEST Both the Hungarian production company and the film to be produced must be registered with the National Film Office of Hungary.

 

In the case of co-productions, the registration request FOR THE TAX REBATE must be filed at least 8 days before the start of principal photography AND THEN THE FINALIZED APPLICATION DOCUMENTATION FOR THE REGISTRATION NEEDS TO BE SUBMITED WITHIN 60 DAYS.

On the basis of the registration APPLICATION DOCUMENTS, the Film Office issues a resolution specifying the planned amount of eligible Hungarian production costs which will potentially qualify for the tax incentive.

 

When the costs are incurred, they have to be verified by the Film Office again. As a general rule, invoices for verification can only be submitted to the Film Office when the production is completed. However, the verification can also be requested on a MONTHLY OR quarterly basis if the Hungarian production costs exceed HUF150 million (approximately EUR550,000).

 

The Film Office reviews the invoices submitted and issues the certificate to the sponsor (who will provide the 20% cash rebate to the producer) after verification. In general, the deadline for the Film Office to complete the investigation is 30 days. However, this may be extended by another 30 days in some cases.

 

Having received the certificate, the sponsor provides the equivalent amount of cash rebate as indicated on the certificate directly to the producer.

 

How certain is it?

 

(ie: are the criteria objective or subjective?) The Film Office registers the companies and the productions according to the Motion Picture Act.

What percentage of the film has to be shot in this country/state and what percentage of the spend needs to be spent here? There is no minimum percentage. Producers do need to subcontract Hungarian taxpayers - OR FOREIGNERS UP THE 25 % LIMIT - and pay them directly, no matter where these subcontractors (crew members) physically perform their services.

 

Which countries/states does this country currently have co-production treaties with? 

 

GERMANY , Italy and France. Hungary is also a member of the European Convention on Cinematographic Co-production.

 

Are there any limitations? No

 

Where do the funds come from? 

 

The funds come from corporate sponsors, typically large companies with a significant Hungarian corporate income tax base, who are motivated by the tax incentives. Corporate sponsorship takes the form of a tax credit with a parallel tax base deduction. The overall tax relief may give the sponsors a 16% (of the fund/rebate provided by them) benefit.

 

Who decides? 

 

Beside the registration and the audit of the National Film Office of Hungary no additional decision is needed.

 

What are the audit requirements? 

 

An audit is performed by the National Film Office of Hungary based on the ledgers and books provided by the production company.

 

If an official co-production is required, what are the conditions for obtaining co-production status, the co-production guidelines and what are the tax consequences? 

 

HUNGARY IS PART OF THE EUROPEAN COPRODUCTION TREATY SO THE SAME RULES APPLY FOR HUNGARAIN COPRODUCTIONS AS ANY OTHER EUROPEAN COPRODUCTION. THERE IS NO TAX CONSEQUENCES OF THE COPRODUCTION STATUS

 

When will the money be received? 

 

After the audit is completed and the tax certificate has been issued by the National Film Office of Hungary money can be received from the corporate sponsors within days.

 

Is there a "cap" on the amount available, both on a film by film basis and in any fiscal year? No

 

What is the current sales tax rate (%) in this country/state? 27%

 

Is sales tax recoverable and if so? On what? 

 

VAT is fully recoverable on all goods and services utilized by a production company except restaurant bills, fuel and taxis.

 

If sales tax is recoverable, when can the production company expect to get the sales tax back? 

 

C4 Action Media partner Im FILM Ltd pre-finances the VAT instead of the foreign partner. And Im FILM Ltd will recover it as well.

 

To what extent will cast and crew travelling to this country/state be taxed there?

 

(ie: What is the withholding tax regime like, national insurance contributions, social security charges etc..) 

Providing that foreign cast and crew stay is shorter than 183 days in Hungary and can prove that they are paying national contributions elsewhere, they will not be taxed.

 

Are there any additional incentives or other advantages that producers should know about when considering bringing a production to Hungary?

(ie: Free or reduced location fees, use of police etc..) 

For co-productions qualified by the relating European convention there is a limited amount of direct state subsidy available. Maximum HUF60 million (EUR220,000) per film.

 

 

I hope this information was helpful.

If you have any further question please don't hesitate to get in contact or give us a call @ 1-310-623-2974.