Hungarian profile - investment grants


1.1 For which industrial sectors

The Hungarian legislation regarding investment subsidies is based on the relevant EU legislation, especially the so called "Guidelines on National Regional Aid" with additional Hungarian legal instruments regulating only to certain procedural aspects. In line with the relevant EU legislation, investment subsidies can be provided to any industrial sector, other than certain "sensitive sectors" such as, synthetic fibers, shipbuilding, the motor industry, transport, coal mining etc.

1.2 For which types of investment

Investments that can be subsidised should either be productive investment (so called initial investment) or job creation linked to investment.

We will deal with job creation linked to investment under point 2 below.

Initial investment that can be supported is according to the definition applied by the Guidelines on National Regional Aid means an investment in fixed capital relating to the setting up of a new establishment, the extension of an existing establishment, or the starting up of an activity involving a fundamental change in the product or production process of an existing establishment (through rationalisation, diversification or modernisation).

1.3 Investment costs eligible for reimbursement

Eligible costs are those which are taken into account as part of the investment value for accounting purposes. Eligible costs relating to intangible assets may not exceed 25 of the total eligible costs and may only relate to certain categories of intangible assets.

1.4 Minimum equity capital contribution

The relevant legislation does not stipulate a minimum equity capital requirement. Instead, the so called maximum "intensity" of the subsidy is restricted, the specific maximum figures being between 35-50%, depending on the region concerned. The remaining costs of the investment should be covered by own funds, meaning in this respect any funds which are not state sourced e.g. equity, bank loans, etc.

1.5 Minimum period of investment

The investment must be maintained for a period of at least five years.

2. Employment / Job creation grants

2.1 Granted amount per employee


In case of aid for creation of jobs linked to an initial investment project, the amount of the aid may not exceed thirty-five to fifty per cent. (35-50%) of the wage cost of the employees hired, again the specific threshold depends on the region in which the investment is located.


Pursuant to EC Regulation No. 2204/2002, which is directly applicable in Hungary, aid for the creation of employment and for recruitment of disadvantaged and disabled workers can be provided under the following conditions:

In case of subsidies for creation of employment:

+ the net aid intensity cannot exceed 35-50% (depending on the region concerned);

+ in case of small and medium sized enterprises ("SME") the above aid intensity can be increased by fifteen per cent. (15%);

+ the employment created must represent a net increase in the number of employees;

+ the employment created shall be maintained for a minimum period of three years, or in case for SMEs for a minimum period of two years;

+ the new workers employed must have never had a job or have lost or be loosing their previous job.

Additional aid can be granted for recruitment of disadvantaged and disabled workers, whereby the gross intensity of all aid relating to the employment of the disadvantaged or disabled workers shall not exceed 50% for disadvantaged workers and 60% for disabled workers.

Further aid can be granted to compensate for any reduced productivity resulting from the disability of workers or for certain extra costs related to their employment.


Act IV of 1991, as amended, of the Republic of Hungary on Enhancing Employment and Catering for the unemployed ("Employment Act") provides that the employees may receive a subsidy up to fifty to one hundred per cent. (50-100%) of the salary of the additional employees for a period of 12 months if they undertake to employ permanently unemployed people.

In our view the aid ceilings and conditions laid down in the Employment Act, do not fully correspond to the restrictions set out in the relevant EU regulations, and as such may not be applied or require a notification to and authorisation from the Commission.

2.2 For which period has the newly created job to be kept?

In case of creating new employment under conditions complying with the requirements of EC Regulation No. 2204/2002, newly created jobs have to be maintained for a period of three years, or in case of SMEs for a period of two years.

In case of special subsides related to the employment of disadvantaged or disabled workers, the workers must be employed for a period of at least 12 months.

If the conditions of creating new employment do not fulfil the conditions laid down in EC Regulation No. 2204/2002, (detailed in point 2.1.2 of our memo), but would qualify as job creation linked to investment, the employment must be maintained for a period of five years.

2.3 Minimum amount of jobs to be created

There is no such requirement, however, as mentioned above the creation of new jobs must result in a net increase in the number of employees.

2.4 Other criteria

Under EC Regulation No. 2204/2002, there are various other criteria under which subsidies can be granted, the most important being that aid for the creation of employment or for recruitment which the beneficiary would undertake under market conditions alone, i.e. without the subsidy amount, may not be subsidised.

3. Training and retraining grants

The rules regarding the granting of state subsidies for training are laid down in EC Regulation No. 68/2001, which is directly applicable in Hungary.

3.1 Granted amount per employee

Where the aid is granted for general training, (i.e. for training which is not applicable only to the employee's position in the assisted firm, but which provides qualifications that are largely transferable), its intensity shall not exceed sixty per cent. (60%) for large enterprises and eighty per cent. (80%) for SMEs.

Where the aid is granted for specific training, i.e. training which is directly and principally applicable to the employee's position in the assisted firm, its intensity shall not exceed thirty-five per cent. (35%) for large enterprises and forty-five per cent. (45%) for SMEs.

The above intensities can be increased by 10% if the training is given to disadvantaged workers.

3.2 Maximum period

No restriction on the period over which subsidy for training can be granted.

3.3 Eligible costs

The eligible costs of a training aid project may include the following:

(a) trainers' personnel costs,

(b) trainers' and trainees' travel expenses,

(c) other current expenses such as materials and supplies,

(d) depreciation of tools and equipment, to the extent that they are used exclusively for the training project,

(e) cost of guidance and counselling services with regard to the training project,

(f) trainees' personnel costs up to the amount of the total of the other eligible costs referred to in (a) to (c). Only the hours during which the trainees actually participate in the training, after deduction of any productive hours or of their equivalent, may be taken into account.

3.4 Maximum amount per employee

See our response to question No. 3.1.

3.5 Other criteria

Training costs exceeding EUR 1,000,000 are not automatically exempted from the restriction on providing state aid and require a case-by-case notification to and authorisation from the Commission.

4. Tax incentives

4.1 Corporate Tax

In general, the corporate tax rate of 16% applicable in Hungary is highly competitive. There are other investor-friendly aspects of the Hungarian corporate tax system, including the following:

+ dividends received by Hungarian tax resident companies are tax exempt, irrespective of the size of holding, unless the payer is a so called Controlled Foreign Company;

+ the so-called "50% Deduction Rule", which allows an additional tax deduction in respect of interest income received from related parties;

+ interest and royalties sourced in Hungary and paid to a non-Hungarian resident company are exempt from Hungarian withholding tax.

The following major tax allowances are available:

4.1.1 Development tax allowance

A development tax allowance for eighty per cent. (80%) of the corporate tax is available for the following type of investments:

+ investments with a present value of at least HUF 3 million;

+ investments with a present value of at least HUF 1 million if the investment is located in certain underdeveloped regions or is aimed at research and development;

+ investments related to bringing an existing food manufacturing plant using foodstuffs of animal origin into compliance with the statutory food-health requirements with a present value of at least HUF 100 million;

+ independent environmental protection or rehabilitation investments with a present value of at least HUF 100 million;

+ investments aimed at providing broad-band Internet service with a present value of at least HUF 100 million;

+ investments aimed at film and video manufacturing with a present value of at least HUF 100 million;

+ investments aimed at job creation.

5.1.2 Other investment tax allowance

Certain other investment tax allowances up to one hundred per cent. (100%) of the corporate tax payable are available if the investment is carried out in certain underdeveloped regions.

5.2 Personal income tax

Private entrepreneurs are entitled to various tax benefits, e.g. for interest paid on loans utilised for the purchase of tangible assets up to forty per cent. (40%) of the interest paid, in case of employing disabled employees they may decrease their tax base with the statutory minimum wage after each disabled person employed etc.

5.3 Real estate tax

Not applicable.

6. Customs related benefits

In respect of reduced customs rates or customs exemptions EC Regulation No. 918/83 has to be applied.

7. Regional/local benefits

Local municipalities may choose to provide special subsidies. Such subsidies have to comply with the rules regarding the provision of state aid.

Investments which are carried our in certain underdeveloped regions are eligible for special investment tax benefits.

8. SME - related benefits

As detailed above, small and medium enterprises are entitled to receive subsidies qualifying as state aid under less stringent conditions.

Small and medium enterprises are also entitled to a special corporate tax allowance in case of financing the purchase of their tangible assets by bank loans. The tax allowance available equals to forty per cent. (40%) of the interest paid, but a maximum of HUF 6 million per year.

dr. Anna Bürchner

Tel: +361 483 4835

Fax: +361 483 4801

[email protected]

dr. Eszter Kálmán

Tel: +361 483 4842

Fax: +361 483 4801

[email protected]