The basics of the Hungarian tax rebate system

In Hungary film productions can get access to the generous 30 % production rebate.

We are very keen on maximizing the eligible spend!

I. What can qualify?

  • Features
  • TV mini-series
  • TV dramas
  • TV programmes – with scientific, historical, political, cultural, touristic, natural wildlife, etc.content

can qualify for the 30 % cash rebate based on the eligible spend of the given production.

II. Calculation example

hungarian-tax-rebate-system-english-30

III. What is the benefit called?

Indirect state subsidy through a “Rebate Settlement Resolution” issued by the National Film Office (NFO). The subsidy can be drawn down from the National Film Institute (NFI) based on the Rebate Settlement Resolution. NFI runs a public escrow account for the subsidy, which is being filled up by the Tax Authority quarterly.

Non-recourse, non-repayable and non-recoupable cash rebate, based on the Hungarian and non-Hungarian eligible production expenditure provided by the Tax Authority (via NFI).

IV. How much is it worth? Any caps?

All local Hungarian expenses (hereinafter: HUN) – with few exceptions – will qualify for a 30% rebate in 100%.

An additional allowance of 25% (hereinafter: HUFQ) of the local Hungarian spend can be spent on foreign costs by the Hungarian Production Company. This will qualify for a 30% rebate in 100% as well.

1,000,000 HUN + 250,000 HUFQ = 1,250,000 qualifying spend = rebate of 30% – 375,000.

HUN and HUFQ can be in any currency.

No minimum expenditure, no cap per project, no annual fiscal budget cap.

V. Are there any supplementary regional benefits or any other additional incentives e.g. reduced location fees, use of police, etc?

Additional funds are available through the NFI to Hungarian films and minority co-productions with relevant Hungarian contribution and content,

No relevant regional funds and no additional production incentives.

VI. What is the benefit based on?

It is based on the eligible HUN and the HUFQ.

Definition of eligible HUN: production expenditure as per the film’s registered budget / spent by the Hungarian Production Company and accounted for in its statutory tax books / paid to Hungarian tax registered subcontractors. 100% up to HUF 3M (cca. USD 10k) and above that 50% of the remuneration to be paid for foreign cast & crew members (hereinafter: HU50) are qualifying as HUN, if the individual is a resident of a country which Hungary has a double taxation treaty that allows the salary being taxable and the taxes (currently 13,5% PIT) are getting paid in Hungary. To avoid paying HUN social security contributions, A1 / CCSSL / SSW certificates must be collected from each of the individuals.

Definition of eligible HUFQ: same as above with the exception that it can be paid to any foreign (non-Hungarian) entity for costs material to the completion of the production. It is capped at 25% of the eligible HUN Spend.

Third country location shooting is possible. Any cost incurred abroad counts providing that it fulfills the requirements for definition of eligible HUN and HUFQ.

VII. Are there any major exclusions?

Excluded costs:

  • costs of copyright and acquisition of underlying rights costs above 4% of the local (HUN + HUFQ) budget;
  • producers’ fee above 4% of the local budget;
  • completion guaranty fee above 5% or 100 Million HUF;
  • marketing and publicity costs above 10 Million HUF or 2% of the budget;
  • travel costs without Hungarian destination;
  • cost of services performed by foreign tax registered entities above 25% of eligible HUN;

VIII. What are the key qualifying criteria?

All film categories qualify – feature / animation / documentary / experimental / TV-film / mini-series.

EXCLUSIONS

  • Films with highly violent or pornographic content (5th category) are excluded. TV sitcoms / reality shows / daily soaps are excluded.
  • No minimum cost requirements, no theatrical screening requirements, no completion / delivery requirements.
  • Film needs to pass “cultural test” with minimum of 16 points out of 32 points in the following categories

Cultural Content   8 points

Cultural Contribution/Hubs/Practitioners   24 points

IX. Who can access the relief?

Applicant must be a Hungarian company or a Hungarian branch of an EU company registered by the NFO.

Applicant must be the film’s producer, co-producer or production service provider who is responsible for and actively involved in the production of the film throughout.

X. What is the application procedure and turnaround time for payment?

The film needs to be registered at the NFO (rebate entitlement). Application for the rebate entitlement needs to include HUN script, budget, cashflow, production schedule, crew-list, co-production agreement or PSA. To register the film 100% financing of the local and foreign costs as detailed in the budget needs to be verified. Registration takes max. 60 days. Registration is verified with issuing rebate entitlement resolution.

Upon completion of the production or after having finished a certain part of the production (either quarterly / 2-monthly / monthly) an application for rebate settlement to be filed to the NFO. The application needs to include the ledgers and other related lists obtained from the books of the applicant(s) and the supporting documents (eg.: contracts, invoices, bank statements, etc.). Settlement takes max. 60 days.

After NFO has concluded an audit of the submitted documentation, the final amount of the eligible HUN, HUFQ and the amount of the 30% rebate is confirmed. NFO issues the rebate settlement resolution of the confirmed rebate amount.

Upon having the rebate settlement resolution, the NFI transfers the rebate to the account of the Hungarian Production Company within 15-30 business days.

For more information visit the website of the National Film Institute (NFI).

XI. Examples of films and series that have accessed the incentive

●       Black Widow

●       Bloodshot

●       Six Underground

●       Gemini Man

●       Red Sparrow

●       Spy Who Dumped Me

●       Spy

●       Blade Runner 2049.

●       Inferno

●       Dr Strange

●       Munich

●       Spectral

●       Die Hard 5.

●       The Martian

●       Atomic Blonde

●       Worldwar Z

●       47 Ronin

●                   Shadow and Bone

●                   Moon Knight

●                   The Witcher

●                   The Crown

●                   Iris

●                   Jack Ryan

●                   The Alienist

●                   Treadstone

●                   The Last Kingdom

●                   Hunters

●                   Hanna

●                   12 Monkeys

●                   Pillar of the Earth

●                   The Borgias

●                   Ransom

●                   Eragon

●                   Season of the Witch