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1. LOCAL SPEND: Hungarian production expenses, goods and services provided by and paid to companies or individuals registered to pay income tax in Hungary
2. FOREIGN SPEND: Production expenses incurred outside of Hungary, paid by the Hungarian production company
3. Foreign Cast/Crew working in Hungary
Non-Hungarian cast and crew members working in Hungary can become qualifying expenses if their country of tax residency has a double taxation treaty with Hungary for such activities. (Note: this is based on tax residency and not nationality.) In this case, the non-Hungarian cast or crew member will have to obtain an Hungarian tax number, and pay personal income withholding taxes (flat 15% of salary) to the Hungarian tax authorities.
As a result, 100% of the first $10,000 of their salary qualifies, as well as 50% of their salary which exceeds the first $10,000, of work completed in Hungary qualifies as Hungarian Spend. The above is a requirement for all EU tax resident cast and crew members. It is in most cases optional for US and Canadian cast and crew and subject to producer decision and type of contract. UK tax residents remain qualifying after Brexit.
In case a Producer elects to have their work in Hungary become taxable in Hungary – and therefore qualify for the Rebate – their fee is not subject to the 4% cap on qualifying producer fees.
Implications for foreign crew paying taxes in Hungary:
The flat personal income tax rate in Hungary is 15% on their remuneration allocable to Hungarian activities. Foreign cast or crew members will have to prove they have paid their social security contributions in their home country (through an A1 form in the case of EU tax residents, a Certificate of Coverage for US tax residents, or an SSW for Canadian tax residents.) Per Diems may also be taxable in Hungary (and as a result become Rebate qualifying spend). After all taxes have been filed and paid, the cast/crew member will receive a certificate from the Hungarian tax authorities proving they have paid their taxes on the work completed in Hungary, which they can use to reduce their taxes in their home country.
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