Both refundable and non-refundable incentives are available to investors coming to or expanding in Hungary. The main types of incentives related to investments are cash subsidies (either from the Hungarian Government or from EU Funds), tax incentives, low-interest loans, or land available for free or at reduced prices. The regulations on incentive opportunities are in accordance with EU rules.
Regional aid intensity map (2007-2013)
The maximum available amounts of regional incentives are based on a regional aid map. All seven regions of Hungary are qualified for incentives, and aid intensity varies between 10% and 50% for large corporations, while small- and medium-sized companies are able to increase the intensity of the received subsidies by 10 or 20 percentage points. The maximum aid intensity for the capital city, Budapest, is 10% for large corporations. The maximum available aid intensity decreases if the investment is a large investment (exceeding EUR 50 million): 50% of the maximum aid intensity determined in the regional aid map is available for that part of the investment between EUR 50 and 100 million, while 34% of the maximum aid intensity for that part of the investment beyond EUR 100 million. When calculating the maximum available amount of regional incentives, all regional incentives – including cash subsidies, development tax incentive, etc. – need to be taken into account.
Grant decisions must be made by December 31, 2013 in order to receive subsidies based on the current regional aid intensity map.
The main types of cash incentives related to investments are focused on implementing the investment (e.g. purchasing assets, construction work, etc.), creating new jobs and training employees.
“VIP” investment subsidy
The Hungarian Government provides a negotiation-based “VIP” subsidy opportunity for investments greater than EUR 10 million with a certain number of newly created jobs, depending on the purpose and location of the investment. If the investment is between EUR 10 and 25 million, the Hungarian authorities will investigate the possibility of subsidizing the project from available EU Funds.
The main areas that attract support are investments in manufacturing (greenfield, brownfield or capacity extension), shared service centres, research and development, and tourism projects. In order to be eligible for the subsidy, 50-100 new jobs have to be created by the investor in the case of manufacturing investments, depending on the region where the investment takes place. In the case of large investments of more than EUR 50 million, 100-200 new jobs have to be created, depending on the place of the investment.
In the case of establishing or expanding SSCs, at least 100 new jobs have to be created in general, and at least 200 new jobs in central Hungary.
In the case of R&D related investments at least 10 new jobs have to be created in connection with the R&D activity. Subsidy applications can be submitted to HIPA in either Hungarian or English. The terms and conditions of the VIP subsidy are determined in the negotiation procedure between the investor and the Hungarian authorities.
In order to obtain a subsidy as defined by the current regulation, grant decisions must be made by December 31, 2013, which is based on the negotiated subsidy agreement.
"VIP” training subsidy
The Hungarian Government also offers what is known as the VIP subsidy opportunity for training employees for new positions. The subsidy is available to investors creating at least 50 new jobs. The maximum amount of the training subsidy for creating 50 to 500 new jobs is EUR 1 and 2 million for creating more than 500 new jobs. It is provided for both general and special training. The maximum aid intensity is 60% in the case of general training and 25% for targeted training. The aid intensity can be increased further in the case of small- and medium-sized enterprises and for training of disabled or disadvantaged workers. The training subsidy is not a regional incentive, thus it can be granted on top of the maximum regional aid intensity.
“VIP” job creation subsidy
The Hungarian Government provides a job creation subsidy for those investments entitled to VIP investment subsidies and that create at least 250 new jobs in disadvantaged or least-developed micro-regions. The maximum available subsidy is EUR 3 million, depending on the location and the number of new employees.
Vocational training facility subsidy granted by individual decision
A subsidy opportunity is available for establishing vocational training facilities and the development of the equipment for practical training. In order to be eligible for the subsidy, the number of vocational school students with training agreements has to be increased by at least 50 compared to the average number of trainees in the two school years prior to the submission of the subsidy request.
The maximum subsidy amount is EUR 8,000 per student, and the total subsidy received cannot exceed EUR 2 million per beneficiary.
Cash subsidies from the research and technology innovation fund
Subsidy opportunities are available from the Hungarian national budget, primarily aimed at R&D activities involving a broad cooperation of companies, universities and research institutions. The subsidies are available through a tendering process.
Non-refundable cash subsidies from EU Funds
A wide range of tender opportunities are available from EU Funds, for which investments of less than EUR 10 million can also qualify. The conditions for the EU tender application, the timing, and the total amount of the subsidy available vary from tender to tender. The tenders reflect the importance given to supporting R&D activities, the creation of new workplaces, environmental investments, and technological investments (with preference given to small and medium sized enterprises).
Cash subsidies from EU Funds for 2011-2013 are available through the New Széchenyi Plan (Új Széchenyi Terv in Hungarian, also known by its initials ÚSzT), which was announced in January 2011. The plan focuses on the following areas:
- Health industry
- Green economy
- Enterprise development
- Science – innovation
For a more detailed overview of the available cash subsidies in Hungary please visit the web site of Hungarian Investment Promotion Agency (HIPA)
Tax incentives are available for companies’ future transactions. Applications have to be submitted to the competent authority in Hungary or to the competent EU institution before projects start.
Development tax incentive
Each development tax incentive may be claimed for a 10-year period (beginning after completion of the development) in Corporate Income Tax (“CIT”) returns within a maximum period of 14 years from the original application for the incentive.
In any given tax year, the tax incentive is available for up to 80% of the tax payable, but in total up to the state aid intensity ceiling. Applications for tax incentives have to be submitted to the Ministry for National Economy, and the Hungarian Government has the right to grant permission if the aggregate eligible costs of the investment exceed EUR 100 million. If the investment is below this threshold, taxpayers only need to notify the Ministry for National Economy before starting the investment.
Other tax incentives
Various Corporate Income Tax and Local Business Tax bases incentives and allowances apply to special business areas and activities such as R&D performed by the taxpayer themselves, job creation by shared service centres (SCCs), or companies supporting film production, performing arts and spectator sports.
For a more detailed overview of the available tax incentives in Hungary please visit the web site of Hungarian Investment Promotion Agency.