Equity
Parliament has voted, RTL to pay hefty ad tax in Hungary (2)
Submitted by Fidesz representative László L. Simon, the bill was supported by 151 MP's, while 35 were against it. The amendment modifies the Advertisement Tax Act, enacted on 11th June.
The amendment defines loss carryforward in corporate or personal income tax as the amount deducted from advertisement tax. That is, taxpayers are not allowed to deduct the same amount from two different kinds of taxes.
Further, advertising media companies will have to declare advertising revenue and tax obligation. Should they fail to do so, the tax is payable by the company that placed the order for the advertisement - that is, an advertising agency or the advertiser. In this case, the tax base should be calculated as the aggregate value of ad placements minus HUF 2.5 million, taxable at 20%. Individual taxpayers are not required to pay advertising tax.
The costs associated with ad placement are not deductible from corporate tax, unless the taxpayer is able to demonstrate that the company required to pay tax on the advertisement has met its ad tax obligation.
The tax base is higher if the taxpayer outsources sale of the advertisement media to a media agency. In such cases the taxpayer is required to increase the tax base by the price margin that appears as revenue in the media agency's books.
The new law also defines 'net sales' in order for advertising tax to be applicable not only to companies falling under Hungarian accounting rules, but also to foreign entities that indirectly involved in advertising in Hungary.
The regulations pertaining to online advertising are also set to change, with advertising tax applicable not only to Hungarian-language advertisements, but to advertisements placed in predominantly Hungarian-language sites.
Approximately two weeks ago, simultaneously with the announcement of a tax investigation of commercial TV channel RTL Klub, Economy Minister Mihály Varga said the channel had carried out a transaction in recent years which enabled the company to declare a major loss carryforward deductible from corporate tax as well as from advertisement tax. The amendment passed on Friday seeks to eliminate the loophole that would have allowed RTL to do so.
The amendment defines loss carryforward in corporate or personal income tax as the amount deducted from advertisement tax. That is, taxpayers are not allowed to deduct the same amount from two different kinds of taxes.
Further, advertising media companies will have to declare advertising revenue and tax obligation. Should they fail to do so, the tax is payable by the company that placed the order for the advertisement - that is, an advertising agency or the advertiser. In this case, the tax base should be calculated as the aggregate value of ad placements minus HUF 2.5 million, taxable at 20%. Individual taxpayers are not required to pay advertising tax.
The costs associated with ad placement are not deductible from corporate tax, unless the taxpayer is able to demonstrate that the company required to pay tax on the advertisement has met its ad tax obligation.
The tax base is higher if the taxpayer outsources sale of the advertisement media to a media agency. In such cases the taxpayer is required to increase the tax base by the price margin that appears as revenue in the media agency's books.
The new law also defines 'net sales' in order for advertising tax to be applicable not only to companies falling under Hungarian accounting rules, but also to foreign entities that indirectly involved in advertising in Hungary.
The regulations pertaining to online advertising are also set to change, with advertising tax applicable not only to Hungarian-language advertisements, but to advertisements placed in predominantly Hungarian-language sites.
Approximately two weeks ago, simultaneously with the announcement of a tax investigation of commercial TV channel RTL Klub, Economy Minister Mihály Varga said the channel had carried out a transaction in recent years which enabled the company to declare a major loss carryforward deductible from corporate tax as well as from advertisement tax. The amendment passed on Friday seeks to eliminate the loophole that would have allowed RTL to do so.
