The extent to which US and international producers can benefitfrom Hungary's new film laws was outlined at a special presentation hosted bythe Hungarian Consul General in Los Angeles late last week.

As of Apr 1 productions shooting in Hungary will be eligible for a20% tax rebate on the Hungarian spend. Alternatively, a 20% rebate is beingoffered on a project's Hungarian spend if a Hungarian co-producer ofdistributor is attached.

The two rebates, which were passed last December and reported here(Screendaily Jan 5), cannot be combined and there is no cash cap on eithermodel.

"It's crucial to involve some additional sources on top of thestate support that exists in Hungary today," Balazs Zachar, the planC;sarchitect and chief legal counsel to Hungary's Ministry of National Cultural Heritage,said in a presentation.

Zachar explained that while state support had always remained aconstant factor since the 1970s, the arrival of international film crews in the1980s and the emergence of Romania and the Czech Republic a decade later asmajor production centres spurred lawmakers to act.

While the laws are clearly designed to boost foreign investment inthe Eastern European country, develop its film industry and reduce a Hungariancorporate investor's tax base, there will be handsome rewards for US producersand their international counterparts.

As with any young law, notional grey areas are already springingup that invite a broader interpretation than perhaps the legislative draughtsmenoriginally intended.

The definition of Hungarian spend, for example, essentiallyinvolves payments made to Hungarian taxpayers, so it would appear that aforeign production shooting a portion of a project in Slovakia could claim arebate if producers work through a Hungarian production service company andcrew.

On another note, if a Hungarian production services companyimports or hires goods and equipment where the payments do not go to a Hungariantaxpayer, this will not qualify as Hungarian spend.

One of the biggest potential loopholes still lingers over theissue of whether a Hollywood studio could set up and register a productioncompany in Hungary and qualify as a local company eligible to a rebate.

Zachar said Hungary's National Film Office would issue a ruling onthe matter through a ministerial decree by May 15.

The scheme is post-financing, meaning that rebates will only beissued after the National Film Office has audited a production's cost and spendand issued a tax certificate.