Taxes – Allowances

Potential Investment-Incentive instuments:

In the following, the HIPA (Hungarian Investment Promotion Agency) Handbook summarizes the instruments, that are used to stimulate investments and which are potentially applicable methods for incentive. These instruments can be used by businesses who wish to invest under certain conditions. Some of them are financial in nature (like direct grant, indirect grant or preferential credit), while others are non-financial.

I. Financial instruments

I.1. Direct financial instruments

According to European Union regulations, the maximum grant intensity for large corporations can only be 50% in the Northern Great-Plain planning-statistical region. The types of available supports are summarized below.
It is important to emphasise that the amount of grant available for large investments of more than 50 million EUR is determined by the following degressive calculation method:

I.1.1. Direct grant awarded by individual government decision

The grant awarded by individual government decision can only be available for asset-based or job-creating investments if the following conditions are met:
For asset-based investment:
In the Northern Great-Plain region, an investment of at least 10 million EUR and creation of 50 new jobs
For job-creating investment:
In the Northern Great-Plain region, an investment of at least 10 million EUR and creation of 50 new jobs
For technology-intensive investment:
Available for new economic activities, that are leading to product diversification or new process innovation, with minimum of 20 million EUR investment (for large corporations only)
For R&D investment:
The R&D cost of investor is minimum 3 million EUR and the number of newly created R&D jobs is at least 25 (for large corporations only)
This is a non-refundable, post-funded, direct grant.

I.2. Indirect financial instruments

I.2.1.Development tax allowance

This indirect financial investment incentive can be used in the period after the completion of the investment. The tax relief exempts 80% of the corporation tax during the tax year of the commissioning of the investment and in the 12 tax years thereafter (but not more than the sixteenth tax year following the filing of the application). In order to benefit from the discount, a data sheet must be submitted to the Ministry of Finance. The development tax allowance can be used if the investment is made up at least 25 percent of its own resources, or if the application precedes the start date of the investment.

The tax allowance can be used if the investment:

• has present value of at least 3 billion HUF, or
• in the case of investments made and operated in the territory of the beneficiary municipality, has 1 billion HUF present value;
• has at least 100 million HUF present value and it is,
  • an investment to create the legal food-hygiene conditions for a food production plant that was previously in use,
  • independent environmental investment,
  • investment exclusively for film and video production,
  • R&D investment,
  • for a company registered on a regulated capital market, an investment made within three years after the first trading day, or
  • investment in free business zone.

I.2.2.Social tax relief

When filing a corporate tax return request to National Tax and Customs Office, employer benefits can be validated up to a gross income of 100,000 HUF, 200,000 HUF or 500,000 HUF depending on the employee group. The benefit can be 0%, 12.5% or 14% tax burden on your employer, depending on its employee groups.

I.3. Loans

I.3.1.MFB Municipal Infrastructure Development Program 2020

The aim of the program is to provide a loan with a preferential interest rate to finance the infrastructure-development investments necessary for municipal tasks and to secure the financing for the own contribution for tenders issued to municipalities. In addition, it will provide a loan with a preferential interest rate to finance the investments necessary for tasks of municipal companies to perform public tasks, and to finance the own contribution required for the tenders issued to them. The range of borrowers is wide. Mostly the municipal government, the regional self-government, the association of local governments and the direct or indirect municipal majority-owned business associations (including the 100% self-owned business associations).

The loan can be used for municipal and local government-owned companies carrying out public tasks, for infrastructure development investments in accordance with the applicable EU and Hungarian environmental legislation, for intangible assets directly related to the investment and for the financing of current assets.

The loan can used to finance the eligible costs – depends on the claimant’s right to recover VAT -, and VAT of tangible and intangible assets.

The interest rate is 3-month EURIBOR + refinancing interest rate + up to 2,3%/year

The term is at least 1 year, up to 20 years.

I.3.2. Széchenyi Investment Loan

Credit products belonging to the Széchenyi Card Program may be claimed by any small- and medium enterprises, who has been a sole proprietor or individual company or has been operating for at least one year as business or as cooperative, defined in the Business Regulations. In addition, the condition of the claim is that the company has no overdue public debt or credit debt. The amount of credit can be claimed is at least 1 million HUF, and can only be increased with 100,000 forints up to 100 million HUF. The claimant must have a minimum of 20% own contribution of the total cost of the planned investment.
The period of the loan is a minimum of 13 months and maximum of 120 months. Within this period during the maximum of 18 months of availability period the loan can be drawn at any time, even in several installments.
Utilization of credit:

• Construction, purchase and development of real estate (if the subject of the investment is clearly related to the activity carried out by the company or included in its business plan).
• Acquisition of new or used machinery, equipment or other tangible assets (if the object of the investment is clearly related to the activity carried out by the company or included in its business plan);
• Investment-related procurement of current assets (up to 20% of loan amount).

The interest is 1 month BUBOR + 4.5%.

State aid is 5% for the transaction interest and 0.65% for collateral cost of Garantiqa Hitelgarancia Zrt., which annual cost is 1,3%.

II. Non-financial assets

In addition to the government/national-economy measures described above, municipalities can provide an attractive investing environment for visitors in many other ways.