Tax incentives relating to film productions

Hungary introduced a simple and transparent tax incentive mechanism in 2004 to stimulate local film production activities. The results speak for themselves, the overall spending on film productions have increased significantly and now Hungary is among the top countries in Central Europe to host international and Hungarian film productions.

The system is a very simple; local companies (sponsors) can fund Hungarian film productions up to 20% of the eligible film production spend. In exchange, the local companies can enjoy significant tax benefits to recoup their contribution.

The tax benefits utilized by local companies take the form of a tax credit with a parallel tax base deduction. In effect, the tax credit serves as compensation for financial support, and the tax base deduction represents the return on the “investment”.

The overall tax relief may provide the sponsors with a 10% to 19% return (depending on their tax base), the equivalent of the effective Hungarian corporate income tax rate. Any unused tax credit may be carried forward for a period of up to three years.

The Hungarian tax rebate system was reviewed and approved by the European Commission in 2008 and it will stay in effect at least until 31 December 2013.

Year Number of films Tax rebate granted (million HUF) Eligible film production spend (million HUF) Eligible film production  spend('000 EUR)
2004. 25 632 3 161 12 852
2005. 167 2 825 14 123 55 977
2006. 433 3 306 16 529 65 403
2007. 477 5 644 28 221 111 392
2008. 483 3 816 19 079 72 056
2009. 491 4 479 22 395 82 688

Source: National Film Office - www.nationalfilmoffice.hu

How can we help?

  • Review and verify eligible spend on the basis of your draft budget
  • Help productions find a local sponsor to source the 20% tax rebate
  • Help Hungarian companies find film productions to be sponsored
  • Optimise the tax and cash-flow plans of Hungarian companies by sponsoring film productions
  • Advise on the tax and international accounting treatment of the tax rebate