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.