New Hungarian Ad Tax to Impact RTL Group Profit

LUXEMBOURG: RTL Group has said that a new tax on advertising in Hungary will severely impact its business and is calling on the Hungarian government to revise the policy, which it believes is specifically aimed at the pan-European broadcaster.

The Advertisement Tax Act was approved by the Hungarian parliament on June 11 and was amended on July 4. It is expected to go into effect in August and will require the first payments by RTL Hungary later that month.

Based on its first assessment of the financial impacts of the new tax act, RTL Group believes its tax charge will increase by approximately 15 million euros ($20.4 million) on a full-year basis. In 2013, RTL Hungary generated EBITA of 15 million euros ($20.4 million) on revenue of 100 million euros ($136 million). RTL said that, based on its preliminary assessment, it expects to record an impairment charge relating to the new tax payments in its 2014 interim results (the amount of this impairment is currently being assessed).

Anke Schäferkordt and Guillaume de Posch, co-CEOs of RTL Group, said in a joint statement: “Operationally, RTL Group continues to perform strongly in 2014. However, our first assessment shows the severe impact of the new advertising tax in Hungary: it will force RTL Hungary in a structurally loss-making position and will also reduce RTL Group’s net profit in 2014. Since 1997, RTL Group has consistently built up a very valuable asset in Hungary, employing more than 350 people and investing in local entertainment and independent news reporting. And we have paid significant amounts of taxes in Hungary. We are determined to pursue all options to protect our asset against this confiscatory tax. Our announcement today sends an alarming signal for all international investors in Hungary. We thus call on the Hungarian government, again, to revise this counter-productive tax policy seemingly specifically aimed at RTL, as it undermines its operations and raises major concerns about the freedom of journalism in Hungary.”