The amended rules of the Advertisement Tax Act are in force from 15 August 2014, and some of the tax payers subject to this Act will first have to file tax returns and pay tax advances already until 20 August.
In light of the tight deadline, we recommend that you check whether your business undertaking is subject to the Advertisement Tax Act and if it has tax liability as soon as possible, we are helping you by that with our short summary.
- WHICH ACTIVITY IS TAXABLE?
Advertising shall qualify as a taxable activity if it appears:
- in electronic media,
- in print publications published or distributed in Hungary mostly in Hungarian,
- on open-air advertising media (billboards) under the Act on Advertising,
- on vehicles, printed materials and real estate,
- on-line, mostly in Hungarian or on websites mostly in Hungarian.
Both the publication of an advertisement based on an order from third parties for the publication of the ad and advertising for one’s own benefit, will qualify as a taxable activity.
- WHO CAN BE CONSIDERED AS A TAXPAYER?
The following will be considered as taxpayers:
- electronic media content providers established in Hungary,
- electronic media content providers making media content in Hungarian accessible in the territory of Hungary in at least half of their broadcasting time,
- print publishers not qualifying as electronic media content providers established in Hungary,
- persons or entities using or utilising open-air advertising media, vehicles, printed materials and real estate for advertising,
- on-line advertisers in the case of on-line advertisements.
If an advertiser orders the publication of an ad, the publisher of the ad must declare - in an invoice including the consideration for the publication of the ad or on an accounting document or on any other document (e.g. a contract on the publication of the ad) - that it has tax liability and that it will comply with its tax return-filing and tax payment obligations or, if its tax base is under HUF 500 million, that it has no tax liability in connection with the publication of advertisements in the tax year concerned.
Attention! If the publisher of the ad fails to make a declaration on its tax liability, the costs recognised in connection with the publication will increase the corporate tax base at the advertiser ordering the ad. Additionally in case of further circumstances as detailed below – above the certain limit- the advertiser ordering the ad will be subject to the payment of advertisement tax as well.
In light of the above, in case of ordering a publication of an ad, it is recommended to contact the partners publishing the ad as soon as it is reasonably possible to obtain the statutory declarations.
- HOW SHALL THE TAX BE CALUCULATED?
Tax liability of publisher of ads:
A publisher of ads has to determine its tax base on the basis of its net sales revenue earned from taxable activities in the tax year concerned.
In the event of advertising for one’s own benefit, the tax base shall be calculated on the basis of the direct costs incurred in connection with the publication of advertisements.
If a tax payer’s profit before tax was zero or made losses in the business year starting in 2013, it may reduce its advertisement tax base for 2014 by 50% of the tax loss carry forwards as defined by the Corporate Income Tax.
Subject to the tax base determined in accordance with the above, the advertisement tax will rise progressively by tax brackets ranging from 1% to 40%. Up to HUF 500 million of the tax base, the tax payer has no tax payment obligation.
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Tax base
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Tax percentage
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up to 500.000 THUF
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0%
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from 500.001 THUF up to 5.000.000 THUF
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1%
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from 5.000.001 THUF up to 10.000.000 THUF
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10%
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from 10.000.001 THUF up to 15.000.000 THUF
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20%
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from 15.000.001 THUF up to 20.000.000 THUF
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30%
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above 20.000.000 THUF
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40%
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In case of related parties, the tax bases of the tax payers qualifying as related parties must be aggregated and payable tax must be distributed in accordance with the share that the tax payer’s tax base represents in the total amount of the tax base of all related party tax payers. Please note that each related party is obliged to document and store the related calculation.
Tax liability of advertisers ordering advertising services
If the publisher of an ad fails to make a declaration described earlier and, as a result, an entity becomes a tax payer as an advertiser ordering advertising services, the tax base shall be determined on the basis of the monthly aggregate amount of the consideration paid for the publication of ads.
However, tax liability will only incur if the monthly aggregate amount of the consideration paid for the publication of ads exceeds HUF 2.5 million. The tax rate is 20% and it shall be paid on the part of the tax base exceeding HUF 2.5 million.
- WHEN AND HOW SHALL THE TAX BE REPORTED AND PAID?
Tax payers shall use form 1494 to meet their tax return filing obligations. A draft version of the form and a guide to completion have already been published by the tax authority on its website. Please note, that if your tax base is below the thresholds listed above, i.e. if you have no tax liability, you are not obliged to file a return on tax or tax advance or tax advance supplementation.
If your company incurs tax liability as a publisher of an ad, you have to determine and file a tax return on the amount of the tax advance for 2014 until 20 August 2014 and pay the tax advance in two equal instalments until 20 August 2014 and 20 November 2014.
The Advertisement Tax Act also prescribes a top-up obligation. Tax payers have to comply with and file a return pertaining to this obligation until 20 December 2014. Returns on tax liability for 2014 must be filed and the difference between the actual amount of tax liability and that of tax advances must be paid until 31 May 2015.
However, if a company incurs tax liability as an advertiser ordering the publication of ads, it has to fulfil its tax return filing and tax payment obligation monthly, until the 20thday of the month following the receipt of the invoice or accounting document on the publication of the ad in question. Therefore, if you incur tax liability as an advertiser ordering the publication of ads only, you will first have to file a tax return and pay tax advance by 20 September 2014.
Regarding the foregoing, we would like to stress out that if a tax payer incurs tax liability both as a publisher of ads and an advertiser ordering the publishing of ads, it has to file two separate 1494 tax returns.
Based on the rules presented, we assume that advertisement tax liability may affect a large number of business undertakings since nearly all business undertakings strive to increase awareness of themselves by publishing ads. Nevertheless, in keeping with the above, not all of the tax payers will be subject to the payment of advertisement tax; therefore, we recommend carefully examining the activities pursued by your company that may be subject to tax liability as well as the tax base related to those activities.
Gábor Kertész
Tax partner
Rita Kormos
Accounting team leader