Hungary provides various tax incentives, including discounts and subsidies
for environmental protection and energy efficiency investments. However, the
conditions and rules for obtaining the incentives changes from time to time, so
it is highly advisable to consider before the commencement any similar
development.
The National Energy Strategy, the EU Green Deal both stipulates and boost
investments in energy efficiency and trans to alternative energy sources.
Thanks to these incentives, we are witnessing the proliferation of solar parks
and rooftop panels, the growing popularity of electric cars and Hungary’s
ambitious pursuit of global leadership role in battery manufacturing. These
developments not only warrant energy- related tax allowances but also highlight
the increasing relevance of R&D related tax incentives and the subsidies
linked to the increase of employments.
Sustainability related tax benefits under the Hungarian corporate income
tax system
Development reserve tax credit
The simplest way to support investments in the Hungarian tax system,
available to all corporate taxpayers, is the creation of a development reserve
and its deduction from the CIT base. This must be set aside from the given
year's profit into the tied-up reserve and used for investments in the
following 4 tax years. As the relevant rules have become more and more
favorable in several stages, actually 100% of the pre-tax profit can be used
without an upper limit. Since the future tax depreciation is limited on the
fixed asset financed from the reserves, this incentive creates a tax credit as
a depreciation brought forward is practice.
Temporary tax incentive for investments aiming net zero emissions
As a Hungarian implementation of the Updated Crisis Statement issued by the
European Commission in March 2023, an additional support became available in
CIT as from 15 July 2023 for investments of strategic importance in terms of
the transition to an economy serving the goal of net zero emissions. The
support is temporary and must be assessed until December 31, 2025, with the
maximum support intensity of 15% in Budapest and 35% outside the capital, in
both 10% addition to medium-sized and 20% addition to small enterprises. The
incentive as a form of development tax allowance may be used for investments in
the production of batteries, solar panels, wind turbines, heat pump equipment
and related components.
Development tax allowance
This incentive is a direct credit from the payable corporate income tax,
the amount of which must be determined by considering the present value of the
eligible costs of the investment and an EU conform intensity rate. The support
may differ depending on whether a small and medium-sized enterprise or a large
company wants to use it, and the location of the investment also affects it.
Since up to 80% of the corporate income tax can be obtained as a discount, an
effective CIT rate of as low as 1.8% is available, which can be used during a
total of 13 tax years, but at the latest until the end of the 16th tax year
from the notification before the start of the investment. To activate the
subsidy, prior notification is required, and it is mandatory to operate the
completed investment for a specified period. This allowance is available in
several investment categories, with different expected investment levels. In
the case of an independent environmental protection investment, the entitlement
limit is HUF 100 million at present value. Same volume is valid for R&D
investments. The entitlement thresholds are even more favorable for SMEs, where
an investment volume of HUF 100 million for medium-sized and HUF 50 million for
small enterprises is applicable in many categories.
Energy efficiency tax credit
This tax credit may be used up to 70% of the calculated tax. Depending on
the applicable intensity rates, a tax saving of maximum 45+20% of the eligible
investment costs may be achieved, up to 15 million euros to finance energy
efficiency investments.
Eligible costs are the cost value and the increase in the value of tangible
and intangible assets that serve the purpose of energy efficiency investment
and renovation, and which dedicatedly help to achieve a higher energy
efficiency level in the future. For investments, renovations aimed at using
energy obtained from renewable energy sources, a tax discount can be used if
the investment, renovation, or part of it involves an increase in energy
efficiency.
The credit may be utilized in 6 tax years. A preliminary energy audit and
certificate of energy savings are required, and the investment must be operated
for at least 5 years. The advantage is that the central Hungarian region is
also subsidized, but unfortunately only one of the development tax allowance
and energy efficiency tax credit may be applied to the same investment.
Establishment of an electric charging station
This incentive is available as a reduction from the tax base, which is
available since 2023 for the total purchase price / investment value of
electric charging stations, on the condition that the respective CIT saving
falls under the so-called de-minimis subsidies.
If you plan for corporate environmental protection and energy efficiency investments in the future, you may rely on our specialized full-scope tax incentive service package: feasibility studies, tax optimization calculations, preparation of tax allowance claims and negotiations for special state support allowances, subsidy documentations, financial advisory and specific audit of the projects, representation in legal disputes. LeitnerLeitner is one of the most influential tax, accounting, audit and legal consulting companies in Central Europe, with worldwide coverage through the Taxand and Praxity network.
