Hungary to Offer Tax Payment Delay on Internet Network Development in 2016

By Margit Feher

BUDAPEST--Hungary will offer a tax incentive from next year allowing telecommunications companies that are modernizing existing or building a new Internet network to delay their tax payments, a government official said Thursday.

The tax incentive will also be granted to utility companies as well, but only for the construction of a new network, such as power distribution and natural gas supply pipelines, Andras Tallai, deputy economy minister, said at a press conference before the government submits next year's tax plans to parliament.

Under the tax incentive plan, companies with various utilities networks will only be required to pay the utility tax in the sixth year after the new stretch--or in the case of Internet networks the modernized stretch--comes into use, the official said.

In 2012, Hungary imposed a special tax on all utility networks by the meter. The levy was part of its taxes on a variety of sectors introduced in 2010 to boost budget revenue after the 2008 financial crisis, instead of implementing fiscal austerity.

Industry experts have said the utility tax has been a hindrance to the development of broadband Internet in particular in underdeveloped areas of the country.

Hungary sold various unused broadband spectrum licences in September last year for a total of 130.6 billion forints ($479.4 million) to Magyar Telekom Nyrt., which is majority-owned by Germany's Deutsche Telekom AG, a local subsidiary of Norway's Telenor ASA, the Hungarian unit of Vodafone Group PLC, and cable and new market participant satellite television and internet provider Digi.

In October 2014, tens of thousands of Hungarians protested at government plans to introduce a tax on Internet use by traffic as measured in gigabytes.

Write to Margit Feher at [e-mail]; Twitter: @margitfeher