The tap-tap of numbers being punched into calculators greeted the news that Hungary is expected to introduce a cultural test for productions hoping to access its 20% tax rebate: international film-makers are rapidly re-examining their production plans to see if Hungary will still work for them.

Proposed changes to the Hungarian Motion Picture Act, expected to be approved by the European Commission (EC) by mid-July at the earliest, will mean a project will no longer be able to simply claim the rebate against its local spend. Instead, as in the UK, Germany and Malta, the European Commission (EC) is insisting eligible productions will have to satisfy certain cultural criteria via a 100-point test. At press time, no details had been announced but the industry hopes Hungary will introduce a flexible test, much like the one in place in Malta, incentivising projects to shoot in Hungary.

"Malta shows the EC has moved beyond a very narrow national definition of culture and is willing to look at a cultural test that gives points for European subject matter and elements," says Richard Miller, the London-based managing director of international consultancy firm Olsberg[s61]SPI.

"One would hope the same elements would appear in the Hungarian test. Malta shows the EC can sometimes be more flexible than its rhetoric would suggest."

US projects eyeing Hungarian location shoots include Seven Arts' $25m Mortal Armour: The Legend Of Galahad, Twentieth Century Fox's The A-Team to be directed by John Singleton, and Barry Levinson's contemporary take on The Saint as a TV pilot for Lexicon Entertainment.

"The people who really make European films, like we do, will be fine," says Los Angeles-based Kate Hoffman, COO of Seven Arts, who shot the thriller Nine Miles Down in Hungary last year. "It accomplishes what these incentives are supposed to do, which is support local film-making."

But the country's recent popularity has meant high demand for its limited crew base. "The crew gets gobbled up quicker and quicker," says Hoffman, who employed a mainly local team on Nine Miles Down.

Producers who have shot in Hungary in the past few years say the territory remains cheaper than the UK, US or Australia. Shooting costs in Bulgaria and Romania are lower although the less sophisticated film infrastructure often requires more department heads to be flown in. But incentives elsewhere (including Australia and Germany), the decline of the US dollar, and the scarcity of crew are starting to erode Hungary's advantage.

The country's stages have been quiet this year, not helped by the shooting hiatus caused by the US writers' protests, uncertainty over the introduction of the cultural test and a possible strike by the US Screen Actors Guild. At press time, Budapest's Korda Studios and Stern Film Studios had no foreign projects lined up for the rest of 2008, though both said they were in negotiations for large films.

But European investors are convinced by Hungary's long-term potential. In addition to Mafilm's 2,000sq m studio to replace one that burnt down last year, Luxembourg-based Orco Group is developing a $65.4m studio in Rakospalota, north-east of Budapest (construction has halted pending an archaeological review). Two facilities are also planned by a consortium of private Hungarian investors led by local director Tamas Sas. One will be built in Pecs, southern Hungary, with a further three-stage studio in Szentendre, north of Budapest.

NEXT WEEK: POLANDWord of mouth: International producers spill the beans on their Hungarian experiences

Why did you decide to shoot in Hungary'

We were offered 20% off the Hungarian spend.

Where else did you consider'

We compiled budgets for Australia, New Zealand, South Africa, Poland, Romania, Canada, Hungary and the UK. The UK was too expensive for us, plus we wanted something kind of other-worldly.

What were your cost savings'

On paper it looked like we were going to save 20%, but in the end I don't think we did as the competition (for crew) was fierce.

How did you find working with local crews'

They were great. If you want A-level crew, you have to get in early. And the language is an issue. You have to trust your heads of department because you don't know what's being said.

Which person or company on the ground was indispensable'

Our unit production manager, Maria Ungor, managed to get great value for us on a lot of things, and Luke Randolph of (US-UK bond company) International Film Guarantors has so much experience (in the region) and so many connections.

What does Hungary need to bolster its status as a first-class international location'

More good soundproof stages. That was a big problem for us at Mafilm and we ended up having to do a lot of sound again. We also had problems with stuff like the internet going down.

What do you wish you had known before you started shooting'

That it was going to be so busy. There were so many productions in town and that swallowed up a lot of crew.

Are you doing any post-production work in Hungary'

We did post in the UK because we had to spend in the UK.

What did you like most about shooting in Hungary'

The locations. We found the perfect dilapidated house for our manor. In England, it would have been restored.

What did you like least'

The shortage of crew and facilities.

Would you shoot in Hungary again'

If it fits the film, then yes.

Why did you decide to shoot in Hungary'

We try to go where there's not only a tax incentive but where there's the talent to prove it.

Where else did you consider'

Although the story is set in Australia, at the time we were making the movie, the Australian incentive was impossible to tap into unless you were spending a certain amount of money. The amount of money you would have to spend to take people to Australia made it prohibitively expensive to shoot there.

What were your cost savings'

The budget was almost twice as much to shoot it in Australia.

How did you find local crews'

Fantastic. They were incredibly efficient. We had a very small, very tight crew on a very difficult film. We brought in almost nobody.

Which person or company on the ground was indispensable'

Our first AD, Michelangelo Csaba Bolla. And there's only one Hungarian production designer that I would use - Csaba Stork. For production services, I recommend Pioneer, Mid Atlantic and Laurin Productions.

What does Hungary need to bolster its status as a first-class international location'

There needs to be a system in place to cashflow the credit in advance. The banks only do it on a week-by-week basis. It's very hard to get it up front, which makes it difficult for your other financiers to put in money.

What do you wish you had known before you started shooting'

How their system works. We'll be much smarter and much better prepared on the next pictures.

Are you doing any post-production in Hungary'

Because of our finance plan, I had to finish the full picture and sound in London, but on future pictures we would definitely look to finish the (digitising, colour manipulation and) visual effects there. They're not there on sound yet, but I'm not sure I'd feel comfortable doing sound in a foreign-language country.

What did you like most about shooting in Hungary'

The crew. The food is fantastic. There's incredible accommodation. We stayed at the Hotel Sofitel in Budapest. There are great restaurants, theatre, culture and nightlife. Your cast and crew don't feel in the middle of nowhere.

What did you like least'

We were there in January and it was freezing.

Would you shoot in Hungary again'

We're going to do three or four pictures there in the next year.

Word of mouth: International producers spill the beans on their Hungarian experiences

Why did you decide to shoot in Hungary'

Hungary had the best combination of experienced crew, a low cost of doing business and a progressive government subsidy programme.

Where else did you consider and reject and why'

New Mexico, Los Angeles, New York and Canada. Los Angeles doesn't have a subsidy but it would have been comfortable for us. New Mexico has a subsidy but we realised Budapest was a substantially less expensive shoot.

What were your cost savings'

About 33%, compared with the filming costs of doing our interior scenes here in the US. Construction costs were a third to a quarter cheaper, depending on where you shoot in the US. What was about a $7m all-in film would certainly have cost $10m in the US.

How difficult was it to access the 20% rebate' Did you access any other incentives'

The subsidy programme pays quarterly. Their payments were prompt and we never had a delay. So in that respect it was fine. But we also needed to monetise the Hungarian subsidy, which we did via a loan programme with a prominent Hungarian bank. It is extremely important that any independent producer start the loan-application process before you begin pre-production. We also had to pay VAT, which we got back pretty much immediately.

How did you find working with local crews'

The Hungarian crews were terrific, especially the art department. They were as good as any I've ever worked with anywhere. The grips and electricians worked really hard. I probably would suggest bringing a costume designer since the style sense is very different. We brought a cameraman, but the entire camera crew were all helpful and terrific. You've got to have some key people who speak both Hungarian and English if you're going to mix crews.

Which Hungarian person or company on the ground was indispensable'

I wouldn't want to do a film without our designer Marton Agh. And I'd try my hardest to get our AD Michelangelo Csaba Bolla on any picture I was doing in Hungary. He's a world-class assistant director who has worked in the US, in Hungary and all over the world.

What does Hungary need to bolster its status as a first-class international location'

Camera, grip and electrical equipment are adequate but can be upgraded and are being upgraded by new companies that are coming in. The more competitive it gets, the better the equipment that will come in.

What do you wish you had known before you started shooting in Hungary'

Register with the national film office and start your bank paperwork early. It is extremely important that any independent producer start the loan application process before beginning pre-production. I'd also have a US or UK accountant. Their accountants are great - I would use a Hungarian firm to deal with the subsidies - but their systems are not really compatible with most US accounting practises. I would use Arriflex cameras rather than Panavision because they have Arriflex locally and the Panavision cameras come from London (or Prague), so if you need something quickly it takes time.

Did you do any post-production in Hungary'

Almost all of our post was done in Los Angeles. Not that I wouldn't do post work in Hungary, but there was no strong reason to since I wanted to come back home.

What did you like most about shooting in Hungary'

It was an amazing city to live in for three months. The people are terrific, the restaurants are great. It's beautiful and there's plenty to do when you're not working.

What did you like least'

The language is impossible - it isn't a language you're going to learn at all. And the exchange rate - the dollar lost 15%-20% during our stay. I'd recommend producers shooting there to hedge their currency early or buy in euros instead of dollars.

Would you shoot in Hungary again'

I'm developing a project to shoot in Budapest later this year.

The Fixers

The names to put on your speed dial when shooting in Hungary

Adam Goodman

Mid Atlantic Films

Goodman's company has provided production services on some of the biggest projects to shoot in Hungary, including Hellboy II: The Golden Army and Eragon.

Contact: adam.goodman1@virgin.net

Ildiko Kemeny

Pioneer Pictures

Producer Kemeny splits her time between London and Budapest, working with key international and local production outfits, including Budapest's post-production specialists Colorfront. Pioneer is set to service Mortal Armour: The Legend Of Galahad for Seven Arts.

Contact: main@pioneer.hu

Kornel Sipos

Laurin Productions

Prolific local producer Sipos was a co-producer last year on Good, starring Viggo Mortensen, and on Grand Illusions' 100 Feet. He served as a line producer on both Underworld and I Spy.

Contact: info@laurinfilm.hu.