Hungary's new advertising tax, which has been introduced
effective as of 15 August 2014, affects not only media companies,
online and offline content providers and advertising agencies
(media companies), but may also affect regular manufacturing and
trading companies active in various industry segments (commercial
companies).
The directly and unconditionally affected media companies are (i)
media companies domiciled in Hungary, (ii) media companies that
broadcast Hungarian language programs for at least half of their
daily broadcasting time, and (iii) publishers of press products who
do not qualify as a media content providers, as well as (iv)
operators of outdoor advertising facilities such as billboards,
vehicles or real properties, (v) publishers of printed materials
(eg. flyers), and (v) advertisers on the Internet. Printed
materials include not only prints on paper, but also t-shirts with
logos, roll-ups, or ballpoint pens. However, if the printing of a
logo or company name serves solely for identification purposes, eg.
the company letterhead, no tax obligation arises.
Commercial companies, ie companies which actually order an
advertisement from a media company and pay for it, are subject to
the advertising tax if they do not receive a written statement by
the media company confirming either that the advertising tax
applies to the media company and that it will comply with the
reporting and payment obligations, or that the media company is not
required to pay the advertising tax in the given financial year.
This statement must be included either in the media company's
invoice or in the contract for the advertising services.
At a media company, the tax base for the advertising tax is the sum
of its annual net revenues from advertising activity and the costs
of its own advertisements. This means that, for example, in the
case of a TV channel, not only the advertising revenues, but also
the production and broadcasting costs of advertisements promoting
the TV channel itself will serve as the tax base.
At a commercial company, if its advertisements are taxable, the
relevant tax base is the consideration paid for such advertisement
in excess of a monthly consideration above HUF 2,500,000 (ca EUR
8,060). In other words, a monthly advertising cost of HUF 2,500,000
(ca. EUR 8,060) is tax-free.
The actual tax burden increases progressively in steps. In the case
of media companies, the tax is 0% up to a tax base of HUF 500
million (ca. EUR 1,6 million), 1% for a tax base between HUF 500
million and 5 billion (ca. EUR 1,6 million and 16 million), 10% for
a tax base between HUF 5 billion and 10 billion (ca. EUR 16 and 32
million), 20% for a tax base between HUF 10 billion and 15 billion
(ca. EUR 32 and 48 million), 30% for a tax base between HUF 15
billion and 20 billion (ca EUR 48 million and 64 million) and 40%
for a tax base above HUF 20 billion (ca. EUR 64 million). If a
media company uses a sales house which is an affiliated company,
the margin realised by the sales house must be added to the media
company's relevant tax base.
In the case of a commercial company, the tax is 20% for the tax
base above a monthly consideration of HUF 2,500,000 paid for
advertising.
The advertising tax must be declared and is payable by the end of
the fifth calendar month following the last day of the tax
payer's financial year. However, advance payments must be made
already during the financial year, namely in two equal instalments
by the 20th day of the seventh and the tenth month of the relevant
financial year. The advance payment must be calculated on the basis
of the tax base of the previous financial year.
As the advertising tax was introduced effective as of 15 August
2014, only the proportionate part is payable for 2014. The advance
payment must be based on a theoretical tax base pursuant to the
2013 financial year and is payable in two equal instalments by 20
August 2014 and 20 November 2014.
The above declaration and payment obligations apply to media
companies. In the case of commercial companies, the tax must be
declared and paid monthly, by the 20th of the calendar
month following the relevant month.
All privately-owned Hungarian media companies have protested
against the tax. TV stations held a 15 minute blackout, while the
printed press published blank front pages in June this year.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.