The European Commission has approved changes to the Hungarian support scheme for film, which now requires projects pass a broad test for European culture

From 2008, every production must achieve at least 16 points on a 32-point cultural test in order to qualify for the 20% tax rebate. The majority of the emphasis of the test is on industrial criteria, such as using Hungarian or European department heads, cast and crew and doing production and post-production in Hungary.

Productions must also meet at least two of eight cultural criteria, which focus European or Hungarian stories, characters, settings, traditions and values.

Furthermore productions that qualify can get cash back not only on their Hungarian spend, but also for a portion of their non-Hungarian spend. A production can receive a rebate of 25% of the Hungarian spend on non-Hungarian expenses, provided the non-Hungarian invoice is paid by a Hungarian producer or service provider.

'That means if you were shooting Hellboy II now, you could go to LA to do your sound recording and get a rebate of 25% of the money you spent in Hungary to help pay for it,' said Adam Goodman of Mid-Atlantic Films, which serviced Universal's Hellboy II: The Golden Army in Budapest last year.

'This is very exciting,' Kate Hoffman, London-based COO of Seven Arts Pictures, told 'Any added tax benefit can only benefit the Hungarian film industry.'

'It's a fair statement to make sure that real independent, Hungarian pictures are protected,' she added.

Hoffman conceded that the cultural test could hamper her company's plans on two upcoming shoots - $12m thriller Catwalk and $25m adventure Mortal Armor: The Legend Of Galahad. The majority of filming on both productions will take place in Hungary, but elements of the productions could work against them in the cultural test, Hoffman said.

Hungarian producers welcomed the news, particularly at Korda Film Studios, where a new 6,000-square-meter stage is set to open in December, and at Stern Film Studio, where an 11-week shoot begins next week on an unnamed UK television production.

Hungarian facilities have been exceptionally quiet this year as a result of uncertainty over the film support scheme and the labor disputes in Hollywood.

The Commission stated that the cultural test -- 'verifiable national cultural criteria' in Brussels -- was required by the Cinema Communication. The Commission's statement emphasized that cultural criteria ensure that state aid for films is directed towards European cultural films.

Furthermore, the Commission wants to avoid a 'subsidy war' among EU member states using incentives to lure large, commercial productions.

The new Hungarian film support scheme will run until Dec 31, 2013. Apart from the tax incentive, the scheme includes direct grants for development, production and distribution, as well as the operation of art cinemas and film festivals.

The Hungarian support scheme, including the rebate, is worth $366m (Euros 231m) until the end of 2013. According to European Commission figures, the tax rebate alone in 2008 is estimated to be worth $20m (Euros 12.75m).

In a press release, the Commission emphasized that the support scheme is is designed to promote the development of film culture in Hungary.

'European cultural films play an important role in our society. I am pleased that the Hungarian authorities have introduced cultural criteria in their film support scheme since the Commission's interim approval of the original scheme,' Competition Commissioner Neelie Kroes said.