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Advertisement tax - change in legislation

Effective from 1 July 2017, the advertisement tax rate will be raised from 5.3% to 7.5% for taxpayers with sales revenues from advertising exceeding HUF 100 million. In the period of January to June 2017, the tax rate will be lowered to 0% to avoid the taxation of companies retroactively and to ensure equal treatment of taxpayers. These measures will result in an effective tax rate of 3.75% for the entire year 2017.

Obligation to submit the tax returns for the tax year 2016 

Based on the current amendment, companies with advertisement sales revenues of less than HUF 100 million will enjoy tax exemption, which complies with de minimis aid. As such, the equal treatment of companies (as required by the EU State aid law) is ensured. Furthermore, advertisement tax paid from 2014 until 31 May 2017 will be considered an overpayment. The companies that did not pay the tax before 31 May 2017 will not be obliged to pay it. Independently from the payment, companies are still obliged to submit the tax return for the tax year 2016. 

The amendment applies to publishing companies, i.e. advertisement service providers who derive revenues from selling advertising. Entities ordering advertising service are not affected by the current amendments. 

Advertisement tax in Hungary - background

The advertisement tax was introduced to Hungary in 2014. Originally, depending on the advertisement sales revenues, companies were taxed at progressive tax rates ranging from 0% to 50%. In 2015, Hungary suspended the tax due to the European Commission investigation and implemented an amended version in July 2015. However, this was done without notifying or consulting the Commission. The amended tax measures maintain the progressive rate but are based on sales revenues over a smaller range of 0% and 5.3% (entities exceeding 100 million HUF in revenues were obliged to pay advertisement tax at the rate of 5.3%.) 

The amendment of the advertisement tax is a consequence of the European Commission investigation and the resolution of 4 November 2016, in which the European Commission has found that the Hungarian advertisement tax breaches the EU State aid rules. The Commission stipulated that the progressive tax rates granted a selective advantage to certain companies and requested Hungary to remove the unjustified discrimination between companies under the advertisement tax act and restore equal treatment in the market. 

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