Hungary has achieved significant development in the film industry over the past 20 years, and today, Budapest stands as one of the most popular filming locations in Europe. Several factors contribute to this success, including beautiful and diverse settings suitable for representing various historical eras and cities, a skilled and experienced workforce, and, importantly, substantial government support that can be accessed for film projects. In this information guide, we will focus on the state subsidies.

This guide provides an analysis of the subsidy system, supported by references to legal regulations. For easier understanding, below you can find a brief summary of the key points:

Film produced in Hungary can receive state subsidies equivalent to 30 % of the film production costs if the film meets certain cultural requirements, and the film producer complies with the procedural rules. The subsidy is provided as post-financing and is non-refundable. The source of funding for this support comes from a portion of corporate tax payments made by economic companies in Hungary. This subsidy system has been approved by the European Commission, ensuring its continuity until December 31, 2024.

Types of the subsidies:

Based on the Act II of 2004 on motion pictures and the Act LXXXI of 1996 on corporate tax and dividend tax, subsidies can be categorized into two main types: direct subsidies and indirect subsidies.

Both types of subsidies have common prerequisites, which we will detail further. In addition to these common prerequisites, direct subsidies have further conditions. The essence of these additional conditions is that direct subsidies are applicable to Hungarian film productions and Hungarian co-produced film projects. Therefore, this type of subsidy primarily applies to local productions and co-productions. In cases where Hungarian or European participation is not predominant during film production, as a general rule, indirect subsidies can be requested.

The amount and basis of the subsidies:

Indirect Subsidies:

The indirect subsidy can cover up to a maximum of 30 % of the direct film production costs. The basis for calculating the indirect subsidy is 100 % of the direct film production costs if at least 80 % of the film’s direct production costs qualify as direct Hungarian film production costs (the costs on which tax must be paid in Hungary).

Nevertheless, if the Hungarian film production costs constitute less than 80 % of the total film production costs, the basis for calculating the indirect subsidy will be 1.25 times the sum of the direct Hungarian film production costs.

For example:

Total film production costs	Hungarian costs	Non-Hungarian costs	Basis of the subsidy	Amount of the subsidy
1 000 000	1 000 000	–	1 000 000	300 000
1 000 000	800 000	200 000	800 000	300 000
1 000 000	200 000	800 000	250 000 (200 000 x 1.25)	75 000

Therefore, the above-mentioned extent of foreign film production costs incurred outside of Hungary can also be eligible for the 30 % indirect subsidy. The direct Hungarian film production costs forming the basis of the subsidy include a certain portion of remuneration for foreign actors and crew members who are obliged to pay taxes in Hungary. The fact of tax payment must be credibly proven.

Any documented payments related to the film’s production are considered film production costs, with the following restrictions.

As a part of the subsidy basis, the following costs can also be accounted for as direct film production costs: royalties (up to 4% of the production cost), the calculated amount of producer fees (up to 4% of the production cost), pre-production and post-production expenses, advertising expenses (up to 2% of the production cost, but not exceeding 10 000 000 HUF), travel expenses (if at least the starting point or destination of the travel is in Hungary), and financing costs.

Direct Subsidies:

In cases where Hungarian participation is more pronounced in the film production, direct subsidies can also be requested. In such cases, the total support (combining both direct and indirect subsidies) can reach 50 – 60% of the production cost, and in the case of exclusive Hungarian participation, it can even reach 100 % of the production cost. The detailed rules regarding this are as follows:

If the international co-production film involves at least one film producer from an EEA state alongside the Hungarian film producer, the level of support can be up to 60 % of the Hungarian contribution.

For feature films, full-length documentaries, popular science films, and animated films that are Hungarian productions, the support can cover up to 100 % of the film production budget, and for international co-productions, up to 100% of the Hungarian contribution, provided that the film production budget does not exceed 237 000 000 HUF for Hungarian productions and 467 000 000 HUF for international co-productions.

The support can cover up to 100 % of the film production budget for Hungarian films or up to 100 % of the Hungarian contribution for international co-productions if the film is originally produced in the Hungarian language, and it is probable that the film production budget will not be recovered from the revenues from all distribution forms. If the film production budget is recouped during distribution, the amount exceeding the production budget must be repaid to the supporter.

The support can cover up to 100 % of the film production budget for Hungarian films or up to 100 % of the Hungarian contribution for international co-productions in the case of international co-productions involving at least one film producer listed on the Development Assistance Committee of the Organisation for Economic Co-operation and Development.

For documentaries, animated films, scientific educational films, experimental films, or short films belonging to the Hungarian film genre, the support can cover up to 100 % of the film production budget for Hungarian films or up to 100 % of the Hungarian contribution for international co-productions, if the funding required for the production of the film contributing to cultural diversity cannot be secured otherwise.

Supported activities:

The act on motion pictures specifically defines the activities eligible for support, which are as follows:

a) Film project development,

b) Film production preparation,

c) Film production,

d) Film distribution, as well as marketing activities that promote film distribution and sales,

e) Film copy restoration and archiving,

f) Research and training in the field of motion pictures,

g) Organizing events related to motion pictures and participating in film festivals or other events,

h) Creating and publishing publications related to motion pictures,

i) Infrastructure development.

Excluded film productions from support:

Film productions that are likely to seriously harm the physical, intellectual, or moral development of minors, particularly those containing pornography or extreme violence (pornographic films, etc.).

Series-based film productions primarily based on tracking real actors and events for entertainment purposes (reality shows).

Improvisational programs based on showcasing the improvisational skills of actors (survival shows).

Reality TV series that present the natural life situations of participants with pre-determined dramaturgy, scripted and improvised dialogues (scripted reality).

TV series produced for multiple weekly broadcasts, consisting of more than twenty episodes, with open-ended dramaturgy allowing for endless continuation (soap operas). However, in the case of soap operas, there is an exceptional possibility of receiving subsidies if the competent authority determines, upon request, that the film production creates cultural value.

Cultural requirements:

Subsidy can only be given if the film production complies with specific cultural requirements. This means that the film production must meet certain aspects of the cultural requirements specified in the annex of the act on motion pictures, as follows:

For film production, the film must meet the cultural requirements by achieving at least 16 points based on the specified criteria in the annex, with obtaining points in at least four of the criteria (a) to (n), and

a) qualifies as a European film co-production, provided that it is made with Hungarian participation, or

b) fulfills at least two conditions from criteria (a) to (h).

For film distribution, the film must meet the cultural requirements by fulfilling at least two conditions from criteria (a) to (h) based on the points specified in the annex.

The specific requirements mentioned above are included in the following annex:

Cultural content	Points given
a)  the subject matter of the film is part of Hungarian or European culture, or involves the presentation or adaptation of historically,	1 for each
b) mythologically, or religiously significant stories (events).
c) the film features individuals or characters related to Hungarian or European culture, history, society, or religion, and their involvement is defining.
d) the film showcases Hungarian or European customs and lifestyle or promotes certain elements of them.
e) the film is set in a Hungarian or other European location or cultural environment, or visually portrays Hungarian or other European settlements (cities, landscapes, regions), or typical Hungarian or European cultural motifs.
f) the screenplay of the film or the material on which it is based is an adaptation of a literary work or another cultural asset (visual or applied arts creation, musical composition, etc.).
g) the subject matter of the film or the material on which it is based revolves around culturally, sociologically, or politically relevant questions for Hungarian or other European societies.
h) the film reflects or represents important Hungarian or European values, particularly cultural diversity, cultural traditions or family values, solidarity, equality, minority protection, human rights, tolerance, or environmental protection.
The film contributes to a better understanding of Hungarian or European culture and identity.
Production conditions i) The film creation establishes cultural value based on its genre.	Points given 4
j) Among the following contributors, the film involves either Hungarian or other EEA state citizens, or individuals from non-EEA countries who have won awards at international film festivals as: director, producer, cinematographer, screenwriter, main and supporting actors/actresses, composer, production designer, costume designer, editor, makeup artist, chief production manager/production manager, post-production supervisor (sound, visual, digital).
l) The final version of the film is made in a language of an EEA member state.	4
m) The contributors of the film, excluding those who earned points according to point (j), are at least 51% citizens of an EEA member state, or it is a co-production that does not qualify as a European film co-production.	3
n) The filming location is in Hungary. The film pre-production or post-production takes place in Hungary.	3

Eligible persons and organizations for the subsidies:

According to the act on motion pictures, subsidies can be granted to Hungarian citizens, individuals with the right to free movement and residence, as well as legal entities with registered offices in Hungary or in any EEA state.

Based on the above, if a third-country investor (for example, from India) intends to avail the subsidies, it is necessary to establish a legal entity registered in Hungary or in the European Union.

Procedural requirements, process of granting the subsidies:

Both the applicant seeking support and the film production to be supported must be registered with the National Film Office. The registration must be requested by the applicant, and the application must be accompanied by the following:

a) The complete Hungarian-language script of the film (or synopsis for documentary, experimental, scientific, and animated films) or a viewable copy of the film.

b) A declaration from the film producer or film production company or film distributor regarding the fulfillment of the cultural requirements based on the annex of the act on motion pictures.

At the time of submitting the application, the applicant must declare the start date of the production period no later than 30 days before its commencement, and the date of the start of shooting at least 30 days before it begins.

At least 30 days before the first day of shooting, particularly but not limitedly the following documents must be submitted:

a) The final detailed production schedule of the film.

b) In the case of a co-production film, the co-production agreement.

c) The budget, financial plan, and financing plan regarding the direct film production costs.

d) A declaration from the applicant committing to employ the number of trainees specified in the legislation under professional supervision for at least 5 weeks during the Hungarian production (if the Hungarian production period is shorter, then for that period).

Fees to be paid in the procedure:

In the case of indirect subsidies, an amount equal to the 0.5% of the film’s direct production costs, but maximum 15,000,000 HUF per film shall be paid to the National Film Office as film industry training contribution.

The National Film Office is entitled to charge an administrative fee up to a maximum of 2.5% of the granted support amount from the film producer or film production company.

LLF and Partners:

Lajos Law Firm (founded in 1997) is specialized in the representation of international investors in Hungary. Our team consists of 5 associated lawyers all of them having an experience over 5 years, 3 associates and an administrative staff of 2 persons. We speak fluent English, Italian and Hungarian. We have great experience in civil law litigation, tax law, labor law, real estate law, insolvency law, agricultural law, administrative law, European law, mergers and acquisitions and competition law.

We are available to assist with any specific questions related to film subsidies. In the official proceedings regarding film subsidies, we are ready to provide legal representation to applicants. Feel free to contact us with any inquiries or support needed during the application process.