Act XXII of 2014 on Advertisement Tax enters into force on 15 August 2014. The new public burden does not only concern the publishers of press products and commercial television channels. It also concerns any person or organisation that publishes or orders the publication of an economic advertisement, or a commercial announcement may become subject to advertisement tax.
Tax liability, activities subject to advertisement tax
For the purposes of advertisement tax, ‘taxable activity’ means the publication of an advertisement, predominantly in Hungarian, in media services; in predominantly Hungarian language press products issued or distributed in Hungary;
- on outdoor advertisement carriers;
- on any vehicle, printed material,
- or real property; or on the Internet predominantly in Hungarian
- or through a predominantly Hungarian website. Publication of an advertisement is also subject to taxation if the publication is realised for its own purposes.
In addition, the party ordering publication of advertisements may also become tax subject if it does not receive a declaration from its business partner publishing the advertisement stating that the tax is payable by the publisher and that the publisher will fulfil the obligations of declaring and paying advertisement tax or stating that the publisher has no tax payment obligation in the given tax year in relation to the publication of advertisements.
‘Advertisement’ means the economic advertisement as defined in Act on the Basic Conditions and Certain Restrictions on Economic Advertising Activities and the commercial announcement as defined in Act on Media Service Providers and Mass Communication.
Persons subject to advertisement tax
- Media content service providers as defined in Act on Media Service Providers and Mass Communication established in Hungary
- Media service providers making media content available in the territory of Hungary in Hungarian language in at least half of their daily broadcasting time
- Publishers of press products not qualifying as media service providers
- Persons or organisations utilising any outdoor advertisement carrier or any vehicle, printed material or real property for the placement of advertisements
- Publishers of advertisements in case of advertisements published on the Internet
- In the case of advertisement for its own purposes, the publisher of the advertisement is subject to tax.
- In absence of a statutory declaration, the party ordering publication of the advertisement (with the exception of private individuals)
Tax base, tax rate
The ‘tax base’ is the net sales revenue derived in the tax year from taxable activities plus the price margin realised by the agency providing the advertisement services based on an agreement concluded with the client for the publication of advertisements as part of the taxable person’s media content service.
In case of publication of an advertisement for its own purposes, the tax base is the cost incurred directly in relation to the publication of the advertisement. The tax base for the tax year starting in2014 may be reduced by (and up to) the amount of 50% of the loss carried forward pursuant to Act on Corporate Income Tax and Act on Personal Income Tax (the amount recognised for the purpose of advertisement tax calculation shall also qualify as loss carried forward for corporate tax and personal income tax purposes), provided that the pre-tax profit for the financial year starting in 2013 is zero or negative.
In the case of tax subjects being liable to advertisement tax as publishers of an advertisement, the tax rate increases progressively in brackets. That is:
- 0% on the part of the tax base not exceeding HUF 0.5 billion
- 1% on the part of the tax base exceeding HUF 0.5 billion but not exceeding HUF 5 billion
- 10% on the part of the tax base exceeding HUF 5 billion but not exceeding HUF 10 billion
- 20% on the part of the tax base exceeding HUF 10 billion but not exceeding HUF 15 billion
- 30% on the part of the tax base exceeding HUF 15 billion but not exceeding HUF 20 billion
- 40% on the part of the tax base exceeding HUF 20 billion
If it is the party ordering publication of an advertisement that is obliged to pay advertisement tax, the tax base is the part of the monthly consideration of advertisement publication exceeding HUF 2.5 million on which a tax rate of 20% shall be applied.
In case of entities subject to advertisement tax that are also considered associated companies under Act on Corporate Income Tax, the tax base shall be assessed aggregately and the tax payable shall be calculated based on the tax chart on the aggregate tax base. The calculated tax amount shall be apportioned to each associated company in proportion as the ratio of the tax base of each tax subject represents in the overall tax base of the associated companies.
The associated companies shall cooperate in order to assess the consolidated tax base and shall keep sufficient records of the calculation which shall be presented to the tax authority upon request.
Payment and declaration of tax
Taxpayers have transitional advertisement tax payment and return filing obligation. Transitional tax is payable in two equal instalments by the seventh and tenth month of the tax year. In addition, in the last month of the tax year, taxpayers will have to supplement the transitional tax paid to the expected total amount of tax payable in the tax year. Tax liability shall be assessed and declared by the last day of the fifth month following the tax year.
Taxable entities ordering publication of advertisements have to meet their return filing and tax payment obligation until the 20th day of the month following the receipt of the invoice or other accounting document issued on the services ordered.
Transitional rules apply to the tax year of introduction of advertisement tax according to which tax will have to be assessed for tax year 2014 on a proportionate basis based on the number of days remaining until the end of the year from the date of entry into force of the act and the transitional tax is payable by 20 August and 20 November 2014 by the taxpayers whose tax year is identical with the calendar year.
Taxpayers not having tax payment obligation, i.e. taxpayers not reaching the cap on tax exemption do not have to file any tax returns.
We have to point out that according to the current regulations, any person who maintains a website or prepares and distributes a brochure or fliers to promote its activity becomes subject to advertisement tax. Due to the fact that most entities pursuing economic activities advertise themselves in some way, many may become subject to the new tax type.
Also, although taxpayers may be released from the obligation of tax payment and tax return filing if their tax base does not reach HUF 5 billion, they are not released from the administrative obligations. Persons subject to advertisement tax and, in case of related parties, all taxable persons shall prepare calculations and keep relevant documents even if they do not carry out taxable activities at all.