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Hungary: Development Tax Allowance


A development tax allowance is available in the form of a reduced tax liability, depending on the scope of the investment, its location and its job creation.

Remarkable changes were made to the development tax allowance in 2014 according to the adoption of Commission Regulation (EU) No 651/2014.


The allowance may be granted for investments, listed below:

The net present value of the investments at least HUF 3 billion or more in eligible expenditure;

• The net present value of the investment in promoted areas is at least HUF 1 billion or more;

• Investments aimed at the creation of jobs;

• Investments valued at least HUF 100 million or more in eligible expenditure which promote environmental protection or film and video –making projects, basic research, applied research and experimental development;

• Investments by SMEs which exceed HUF 500 million, if the enterprise increases the number of employees by five (for small enterprises) or 10 (for medium -sized enterprises) within the following four years, or increases its wage costs by at least 10 times ( for small enterprises) or 25 times (for medium sized enterprises) the annual minimum wage;

• Investments promoting the process and distribution of agricultural products;

• Investments at least HUF 100 million in projects implemented and operated in a free entrepreneurship zone.

Additional requirements must be met for investments relating to the first two points above—for a five-year period following the first incentive year, the company must increase the number of employees by at least 50 (or 25 in underdeveloped regions), or increase the wage costs by at least 300 times (or 150 times in underdeveloped regions) the annual minimum wage.

A development tax allowance for investments exceeding EUR 100 million in eligible expenditure (which is in accordance with EU regulations on government subsidies) is available by the permission of the Ministry for National Economy.

According to the rules the development tax allowance, 80% of corporate income tax payable may be deducted for up to 10 years within the 12-year period beginning from the filing of the relevant notification with the Ministry for National Economy. This period was increased by the Act of the Corporate Tax to 16 years for investments started after 31 December 2016.


Regional aid map of Hungary

Large enterprises based in Budapest are not eligible for tax incentives, while those in Pest County are only able to claim tax incentives for projects aimed at starting a new economic activity in certain assisted areas (available tax incentive is 20% or 35%).

Aid intensity is 25% in the Western Transdanubia region and 35% in the Central Transdanubia region. In the Northern Hungary, Northern Great Plain, Southern Great Plain, and Southern Transdanubia regions, the maximum aid intensity is 50%.


Free entrepreneurship zone

The free entrepreneurship zone contains more than 900 settlements in the unprivileged areas of Hungary designated by the government and coordinated by the regional business development agency that is comprised of individual regions, separated by public administration, borders, and topographical lot numbers, that are treated jointly for regional development purposes.


Written by

Dr. Júlia Veress

newsletter_december_2017.pdf (889.54Kb)