Production Tax Rebate in Hungary
In a nutshell
Register Project
The Hungarian production partner registers the project with the NFI submitting a budget for the production (as a base for an estimate by the NFO of how much the rebate will be)
Finish Production
The production is completed, and all crew/cast/subcontractors of all sorts are fully paid by the Hungarian production partner at total cost and applying VAT of 27%
Pay bills and submit documentation
Once production is finished and all bills paid, the Hungarian production can submit the completed ocumentation for the NFO audit
NFO audit and issue of tax certificate
Upon completion of the audit, the NFO issues the actual Tax Certificate
Payment of tax rebate and VAT refund
Tax Payer Sponsor will pay out the tax rebate to “ABC” Films, Abroad Films can reclaim the VAT from the Hungarian Tax Authorities (NAV), (50-90 days)
Hungary filming incentives
30%
Production tax incentive
1st
Most popular location in Europe
$670m
Film production spending in 2022
0.3%
of country’s GDP is film production
Hungary has raised its production tax incentive from 25% to 30%
Films (for cinema and television) produced in Hungary are eligible for a 30% rebate based on their expenditure (all the direct film production costs) spent in the country. The scheme is part of the film support program approved by the European Commission.
The incentive is available through local business companies that receive tax relief after their support of films. The Hungarian State guarantees support through the Collection Account managed by the NFI. The financial support is provided through a cash refund (post-financing). The 30% incentive is extendable to 37.5% of the eligible production expense by adding 7.5% non-Hungarian costs. (The non-Hungarian eligible spend is capped at 25% of the rebate.)
About filming in Hungary
The country has hosted numerous major international productions in recent years, including Disney’s Black Widow, Fox’s Red Sparrow, Lionsgate’s Robin Hood, Sony’s Blade Runner 2049 and Will Smith's thriller Gemini Man directed by Ang Lee. Independent films include Wash Westmoreland’s Colette, starring Keira Knightley. Budapest is the most popular location to shoot films in Europe. Film production spending reached $670m in Hungary in 2022.
Former Hungarian film commissioner Andy Vajna said: “In addition to the tax incentive, Hungary’s film industry has highly educated and experienced film crews, a variety of exciting and new film locations and state-of-the-art sound stages.”
"Budapest has recently become Europe’s biggest film production base after London, with top producers shooting with the world’s biggest stars." Csaba Kael, Chairman of the National Film Institute
What productions can benefit?
- Films of all genres made for cinema release
- Feature films, series, documentaries and animations made for television or other distribution platforms
- Porn and extremely violent films, commercials, reality shows, news, sports coverage, talk- shows, talent shows and daily soap operas and scripted realities are excluded
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)
- 15 points have to be earned to pass
Registration of company and production
- Abroad Films, as a registered with the National Film Office (NFO), is eligible to apply
- Foreign companies have to conclude coproduction or service agreements with a Hungarian-registered company like Abroad Films
- Production has to be registered at NFO
- The start of filming has to be reported to NFO
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 spending 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)
Excluded or limited costs
- Part of the copyright costs over 4% of the budget
- Travel costs are limited to trips from and to Hungary; stopovers are possible
- P&A is limited to up to 2% of the budget (but max 10m HUF)
- The cost of services delivered by non-Hungarian sub-contractors is limited to up to 25% of eligible Hungarian spend
- Producersʼ fee (line, co-, executive and other producers) maximum up to 4%
- Costs of completion bonds are limited to up to 5% of the budget (but max 100m HUF)
- Remunerations of cast and crew members up to 3 million HUF per person and per film production will be eligible at 100% for the tax rebate, and the eligibility of all remunerations exceeding this limit will be capped at 50%. (these limitations do not apply to Hungarian self-employed or loan-out cast and crew members whose remuneration is subject to different tax liability than personal income tax)
- Expenses where the date of the certificate of completion falls out of the production period, or it is issued later than three 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, not the event. If costs cannot be separated, all expenses should be excluded
Example breakdown
Foreign Producer:
“ABC” Films
Local production company:
Abroad Films
Authority:
National Film Office, NFO
Taxpayer sponsor:
A company paying taxes in Hungary, will be arranged either through NFO (commission of 0,75% of the budget, see below)
The system works as an ex-post (proof of payment required) indirect tax rebate. The taxpayer sponsor will pay the rebate due to “ABC” Films. This partner is who receives the Tax Certificate issued by the NFO, and this enables the taxpayer company to deduct the amount granted once from their taxes payable and as well from their tax base. This way, this partner saves on his taxes which is their incentive to participate in the scheme.
The registered Hungarian production company, AbroadFilms, applies to the Film Office and liaises with the authority.
The project must be registered at the Film Office, and a budget must be submitted.
The NFO identifies the amount of tax credit based on the budget submitted and the amount of tax credit the production will be able to receive.
Upon completion of the production, an application for Tax Certificate will be filed with the Film Office. The application needs to include the ledgers and other related lists obtained from the accounting books of the applicant and the supporting documents (e.g., contracts, bank statements, etc.). The audit is solely performed by the NFO based on the ledgers and books provided by the production company.
After the NFO has concluded an audit of the submitted documentation, the final amount of the eligible Hungarian and non-Hungarian spending is calculated, and the rebate is confirmed. NFO issues the Tax Certificate based on the confirmed rebate amount.
On average, the whole procedure, from applying for the Tax Certificate to receiving funds from the taxpayer sponsor, takes approximately 50-90 days.
Production expenditure as per the film’s registered budget. Spent by the Hungarian Production Company registered by the NMHH Film Office (“National Film Office”) and
accounted for in its statutory tax books. Paid to Hungarian tax-registered subcontractors (both companies and individuals).
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 Hungarian Spend.
The qualifying non-Hungarian expenses can be incurred in any country, any location. The non-Hungarian expenses are subject to the same qualifying rules as the Hungarian expenses.
The funds come from corporate sponsors, typically large companies with a significant Hungarian corporate income tax base, motivated by tax incentives. Corporate sponsorship takes the form of a tax credit with a parallel tax base deduction.
The Hungarian National Film Fund pools these amounts together into their accounts. The production can directly contract with the National Film Fund to receive the rebate; for this, they take a 2.5% fee of the rebate amount (i.e. 0,75% of the budget).
There are two ways a foreigner working in Hungary can be paid to accommodate the tax rebate.
- Include their wages under the Hungarian Spending.
- In this case, a personal income tax is paid under the flat 16% tax rate
- The tax paid in Hungary can be credited in the home country by the individual, i.e. in general, paying tax in Hungary would not mean an effective increase in the overall tax liability of the foreign cast and crew members.
- In this case, the wages are included within the qualifying non-Hungarian spend
- A Non-Hungarian company invoices the wages and other additional costs associated (e.g. fringes) of the foreign crew and talent
- The invoices are paid from the Hungarian production account
- Cast and Crew working in Hungary for fewer than 183 days will not be taxed, provided that it can be proved that they are paying national contributions in some other country. No withholding tax contributions or national or social security tax contributions have to be paid.
- The VAT currently applicable is 27% on most goods and services.
- VAT is fully recoverable on all goods and services of the production.
- However, restaurant bills, fuel and taxis are excluded.
- No taxes or fringes have to be paid on Hungarian crew, talent or extras – each individual is responsible for adhering to the relevant tax law.