As of 20 August 2014, businesses in Hungary are required to pay tax in connection with their advertising activities. The new legislation applies to individuals or organisations that:
- publish adverts (“Publishers”); and
- place orders for adverts (“Advertisers”)
An advertisement is defined as:
- a communication which is aimed at promoting
- the sale or other use of goods, services or other valuable rights or interests;
- the business’s name, brand, or profile;
- media content which is aimed at promoting the products, service or image of the business, whether directly or indirectly;
- advertising related to the Publisher’s own products, services or activities.
- media content providers based in Hungary;
- media service providers that make content available in Hungarian, in at least half of its daily programming, within the territory of Hungary;
- the press;
- businesses advertising outdoors, including on land or on vehicles; and
- publishers of online advertising.
Publishers bear primary responsibility for calculating their tax liability, submitting tax returns and paying the tax. Advertisers are also liable to pay the tax, except where the relevant Publisher makes a declaration that it is complying with its obligations, or they are not obliged to pay such tax, ie in the case its tax base does not reach HUF 500 million. (a “Declaration”). Such a Declaration can be included in an invoice, contract or other accounting document.
The taxable transactions are the publication of advertisements:
- in a media service;
- in the press;
- in outdoor advertising;
- on any vehicle or on land;
- in printed material; or
- on a primarily Hungarian language website.
In addition, the placing of an order for an advert can also constitute a taxable transaction, unless there is a Declaration in respect of that advert.
The basis of the tax calculation is different for Publishers and Advertisers. In the case of Publishers, the tax is based on the net income from their taxable activities in the relevant fiscal year. Where the advertisements relate to the Publisher’s own activities, the tax is based on the direct costs incurred in relation to those adverts. In the case of Advertisers, the tax is calculated on the monthly consideration relating to advertising, above a threshold of HUF 2,500,000.
The tax rate is set in progressive bands, which Publishers are required to pay as follows:
Please click here to view the table.
In the case of related entities, the taxable amount for each entity will be added together and the tax will be calculated in accordance with the above banding on the total taxable amount. The tax payable by each entity will then be pro-rated amongst them.
Advertisers are liable to pay a flat rate of 20% on their taxable amount, and this is to be paid on the 20th day of each month following receipt of the invoice for the publication of the advert.
Publishers are required to carry out a self-assessment and submit their tax returns and pay their tax liability by the end of the 5th month after the end of the fiscal year. In addition, Publishers have to pay a tax advance in two equal instalments on the 20th day of the 7th and 10th month of their fiscal year, estimated on the basis of their tax liability in the previous year.
The first payment of the tax as well as the tax advance were due by 20 August 2014, in respect of the proportion of the business’s financial year as at that date. The second instalment of the tax advance is due by 20 November 2014.
In respect of companies’ liability for corporation tax, the costs incurred in connection with advertising (subject to their value being at least the fair market value), do not constitute expenditure incurred in the course of their business.