The development tax benefit allows Hungarian SMEs realizing certain investments to decrease their corporate tax by up to 80%. The mechanism is simple: you can reduce your corporate tax by a certain portion of the amount you invested. Although not every type of investment qualifies for this significant tax benefit, you will not want to miss out on this opportunity if the conditions apply to your business.
Is your SME eligible for the tax benefit?
Small and medium enterprises are both eligible for the development tax benefit. Legally speaking, a business is a small enterprise if it has less than 50 employees and a balance sheet total or yearly net sales below EUR 10 million. By contrast, a business is a medium enterprise if it has less than 250 employees and a balance sheet total or yearly net sales below EUR 43 million. If you would like to apply for the development tax benefit, your company must not be subject to legal action due to unpaid taxes or undeclared employment.
What kind of investments are covered?
The development tax benefit is aimed at motivating investment. It covers the following kinds of projects, among others.
- Any investment aimed at creating new jobs
- Any investment over the present value of HUF 3 million
- Investments carried out by medium enterprises over the present value of HUF 300 million (HUF 100 million from 2022)
- Investments carried out by small enterprises over the present value of HUF 200 million (HUF 50 million from 2022)
- Investing in environmental protection, basic research, applied research or experimental development over the present value of HUF 100 million
Certain industries, such as the carbon industry, the steel industry, and shipbuilding, are excluded altogether. The rates of the tax benefit vary between 10% and 70% of the investment’s value depending on the region where the project is realized.
How to apply for the development tax benefit?
Unlike in the case of other tax benefits, you can only apply for the development tax benefit beforehand. Your application must be submitted to the Ministry of Finance using an electronic form that includes the details of the investment (location, start and end date, goal, expenses) as well as those of your Hungarian company. Your company must provide at least 25% of the invested funds as own contribution. After submitting your application, you must begin the project within two years. Once it is complete, you can make use of the development tax benefit for 12 years, but only within 16 years of your application. Please note that you must maintain the new facilities and jobs for at least three years. While making use of the development tax benefit, you can reduce your corporate tax further if you qualify for other tax benefits.
Interested in tax benefits? Contact us!
The development tax benefit is a very complex topic, and we have barely scraped its surface. If you think this might be relevant to your Hungarian company, contact the English-speaking accountants of Helpers Finance to learn more. You can ask for a consultation by calling our office on +36 1 215 0712, by e-mailing firstname.lastname@example.org or by filling in our contact form.
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