25+5% TAX REBATE

From the USA through the Netherlands to Asia several foreign movie production companies have enjoyed one of the greatest advantages of shooting in Hungary: the 25 percent tax rebate.

 

But what is 25+5 % tax rebate exactly?

The Motion Picture Act and Corporate Tax Act, in other words the Hungarian financial support system has been providing a unique opportunity (tax rebate) for those who shoot a movie in Hungary for several years. In a nutshell: if a foreign movie production company shoots a movie in Hungary (and spends money, even only on video or audio post-production), gets 25 percent of the cost back from the Hungarian government indirectly. Productions can request a monthly settling and refund. Subtracting administrative costs, the production still can get 23 percent back.

The Motion Picture Act and Corporate Tax Act offers two methods for a movie’s financial support: first of all there is a direct state support (for local films or co-productions; sometimes a foreign company can get this one as well). The other form is the indirect state support, which is a tax rebate for films and related projects.

 

Direct tax rebate can be got by movies, short movies, documentaries, animation movies and TV productions, if they fulfill the below:

  • the script has to pass a cultural test (the Hungarian coproduction partner is responsible for this)
  • the National Media and Infocommunications Authority’s administration and accounting regulations (the Hungarian coproduction partner is responsible for this)
  • after submitting the bills the direct tax rebate has to be requested, which will be subtracted from the tax of profitable companies registered in Hungary (the Hungarian coproduction partner is responsible for this).

 

Administration follows the below protocol:

  • registration and cultural test (40-50 days)
  • subsidy request (30 days before shooting)
  • shooting, post-production
  • auditing, tax certificate by NFO
  • cash back

 

For getting the tax rebate it is necessary to involve a Hungarian production company, through which the requested money flows back to the requester.

Expenses occurring abroad can also qualify for the 25 percent tax incentive, up to a quarter of total expenses paid to Service Providers in Hungary. Thus you can get 25 percent of the money you spent in Hungary filming back. (125% of expenses incurred in Hungary x 25% = 31,25%). There’s no upper limit to the total expenses.

 

Total budget 100% Expenses paid to Service Providers in Hungary (%) Expenses paid to Service Providers abroad (%) Basis of 25% Tax rebate
(Max 125% of expenses incurred in Hungary)
SAVINGS
Bases on expenses in Hungary (%)
Film 1 100 0 100 25
Film 2 80 20 100 31,25!
Film 3 60 40 75 18,75

 

Further details about 25 percent tax rebate:

 

Expenses that qualify for the tax rebate include all expenses paid to a Hungarian taxpayer

  • Direct pre or post-production and production expenses paid by the qualified Hungarian production
  • Wages, above- and below-the-line, when paid by the qualified Hungarian production
  • Financing, administration and insurance costs, completion bond, accommodation etc. costs

 

Expenses excluded by the law are

  • Indirect costs (eg. A&P) over 2% of the overall spend (max 17 kEUR)
  • Costs incurring after the master print (distribution)
  • Royalties are limited to 4% of the Hungarian budget of the film
  • Producers’ fees are limited to 4% of the Hungarian budget of the film

 

Up to 25% of the expenses can be foreign expenses which also qualify for the 25% (from 25.06.2014) tax rebate.

Total state subsidies shall not exceed 50% of the production budget, or in case of

  • Co-productions (from 25.06.2014) of the Hungarian contribution if another European Economic Area member state’s registered film production company participates in the co-production: 60% rebate
  • Co-productions (from 25.06.2014) of the Hungarian contribution if another OECD member state’s registered film production company participates in the co-production: 100% rebate
  • Low-budget films and films produced in Hungarian language (from 25.06.2014): 100% rebate
  • Documentaries, animation, shorts, experimental films etc.: 100% rebate

 

The tax rebate is a non-recourse, non-repayable and non-recoupable cash rebate.