Effective from 15 August 2014, Act XXII of 2014 on Advertising Tax (the ATA) has been amended in several respects. (Amended by Act LXXIV of 2014 (effective from 1 January 2015) and Act LXII of 2015 (effective from 5 July 2015))
Changes affecting publishers of ads
Changing tax brackets and tax rates
Although the tax rate applicable to publishers of ads (primary tax liability) continues to rise progressively by tax brackets, there has been a change in both tax brackets and tax rates. With effect from 1 January 2015, the top rate rose from 40% to 50%. As of 5 July 2015, 0% applies to up to HUF 100 million of the tax base, and 5.3% to the portion exceeding HUF 100 million.
As a general rule, publishers of ads have to prorate their tax base for 2015 and apply the new tax rate to such proportion of the tax base that corresponds to the proportion represented, in respect of the number of the calendar days in the tax year, by the number of the calendar days of the period between the effective date of the amendment (5 July 2015) and the end of the tax year.
The amendment to the Act allows publishers of ads to apply, at their sole discretion, the new tax rate to all tax years. Thus, taxpayers may correct their tax liability and tax base for the 2014 tax year by way of self-revision. However, self-revision does not change the amount of the tax advance liability specified in the return for the 2015 tax year.
Taxpayers who commenced their taxable activity on or after 5 July 2015 have to apply the new tax rate.
The number of taxpayers subject to advertising tax liability is expected to increase - tax advance return
Owing to the change in tax brackets and tax rates, an increase in the number of taxpayers subject to advertising tax liability is likely to occur. They qualify as taxpayers commencing their taxable activity without a legal predecessor; therefore, they were to file a tax advance return by 20 July 2015. The amount of the tax has to be assessed on the basis of the expected 2015 tax base and filed on Form 1594. Tax has to be paid in two equal instalments by 20 July and 20 October, respectively.
Changes in related party aggregation
The rule of aggregation applicable to related parties has changed. With effect from 1 January 2015, when the tax liability of taxpayers qualifying as related parties is assessed, a prorated tax base applicable to the period during which the related party relationship exists has to be taken into consideration. Pursuant to the amendment in force since 5 July 2015, the rule of aggregation applicable to related parties applies only if a related party relationship was established through a demerger after 15 August 2014. This provision applies retroactively, i.e. taxpayers may make adjustments in respect of the tax years concerned through self-revision.
Different financial years - different rules
With effect from 1 January 2015, taxpayers whose financial year differs from the calendar year comply with their advertising tax liability in accordance with their own tax year. Therefore, the assessment of their tax liability for the transitional tax year (i.e. the period between 1 January 2015 and the last day of their 2014 financial year) has been regulated.
The transitional tax year is always shorter than 12 months; therefore, in order for the tax due on a fractional tax year to be assessed, the tax base for the transitional tax year has to be established.
A return (on Form 1549) for tax advance liability for the transitional tax year has to be filed by 15 January 2015. The base for the tax advance liability is the amount calculated for 12 months by applying the tax rate specified in Article 5(1) of the ATA to the tax base for 2014.
Tax advance has to be paid in two equal instalments by 15 January 2015 and the last day of the transitional tax year, respectively.
Taxpayers established between 15 August 2014 and 31 December 2014 which, at their formation, opted for a financial year that differs from the calendar year do not need to apply the rules on the transitional tax year. They have to assess their tax advance liability in accordance with the general rule.
Tax returns for the transitional tax year submitted before 5 July 2015 can be corrected through self-revision if the new tax rate is more advantageous to the taxpayer concerned.
Changes affecting advertisers
Changes in tax rates
Advertisers' tax liability (secondary tax liability) is 5% of such portion of the monthly aggregate (net) consideration charged for the publication of ads that exceeds HUF 2,500,000. The new tax rate applies to contracts concluded on or after 5 July 2015; thus, the 20% tax rate applies to the preceding period (i.e. the one between 15 August 2014 and 4 July 2015).
New exemptions
The amendment effective from 1 January 2015 has increased the number of possible exceptions available to advertisers. In 2014, in order to be exempted from advertising tax liability, advertisers had to obtain a declaration by publishers of ads. As from 1 January 2015, exemption also applies to the following cases:
- Advertisers can provide credible evidence of the fact that they have asked publishers of ads to issue the declaration, however, they did not receive one within 10 working days from receipt of the invoice for or the accounting document on the publishing of ads. However, they had notified the tax authority of the fact that they had asked for the issue of the declaration, providing the name (designation) of the publisher of the ad and the consideration charged for the publication. Advertisers may notify the tax authority in a paper-based format (no official form has been prescribed for this purpose) until the 20th day of the month following receipt of the invoice.
- As at the date of the placement of an order for the publication of an ad, the relevant publisher of ad has been entered into the tax authority's registry made available at the tax authority's website. The tax authority registers advertisers - at their request - only if they file a tax and tax advance return and comply with their tax and tax advance payment obligation by the deadline set for such purposes or submit a declaration to the tax authority to the effect that they have no outstanding tax liability in the tax year concerned.
Corporate tax base increasing items
With effect from 1 January 2015 advertisements related to Hungarian sports events are not subject to tax pursuant to Act I of 2004 on Sports.
If the exemption criteria established for advertisers do not apply and the costs recorded for the relevant tax year in connection with the publication of ads exceed HUF 30 million, pursuant to Point 16 of Part A of Annex 3 to the Corporate Tax Act, they do not qualify as costs and expenses incurred in the interest of business operations. Pursuant to the modification of the Corporate Tax Act effective from 5 July 2015, this rule has a retroactive effect; therefore, tax return no 1429 can be corrected by way of self-revision.