Changes to the aid map - changes to intensity rates
An important change in the field of state aids granted by the Hungarian state, including tax reliefs that qualify as state aid, is that from 1 January 2022 new regional aid map adopted by the European Commission. Accordingly, with effect from 21 March 2022, the Hungarian legislator amended the rules on corporate tax relief for development and energy efficiency to reflect the changed aid intensities.
The main change is that Budapest and Pest county will become two separate support regions. Accordingly, the in all Pest county municipalities the aid intensity may be 50% for large companies, instead of the previous aid intensities of 20 and 35% depending on the municipality. What has not changed is that in Budapest, only small and medium-sized enterprises can benefit from the development tax allowance and only with an aid intensity of 201 TSEK per municipality. For the period 2022-2027, the regions of Pest, South Transdanubia, North Hungary, North Great Plain and South Great Plain will be eligible for aid intensities of 501 TSEK to 301 TSEK, while the regions of Central Transdanubia and West Transdanubia will be eligible for aid intensities of 301 TSEK to 301 TSEK.
With regard to the energy efficiency tax credit, the aid intensity of 30% has not changed in Budapest, while in the other regions the aid intensity for energy efficiency investments and renovations increases from 35 to 45%, which can be further increased for small and medium-sized enterprises.
Development tax allowance
In addition to the change in aid intensities in the area of development tax credit, it is important to note that investments with a value of at least HUF 6 billion in present value or investments for job creation with a value of at least HUF 3 billion in present value, which were previously eligible for investment in start-ups leading to product diversification or start-ups leading to new process innovation, will cease to be eligible for aid as a separate aid item for large enterprises in certain municipalities of Pest county.
Under the new rules, there will no longer be a condition for any aid title that the investment must be a start-up investment in a new economic activity, but only start-up investments will continue to be eligible for each of these titles.
As a general rule, the new provisions will apply to investments for which the taxpayer has made a notification or submitted an application to the relevant authority on or after 21 March 2022, but if the taxpayer has submitted the notification or application after 31 December 2021, but it has not been registered or approved by the authority by 21 March 2022, the new rules will apply to this tax relief.
A relief on the economic impact of the Covid situation is that the a firm that is in difficulty between 1 January 2020 and 31 December 2021 but was not in difficulty before that date is no longer a firm in difficulty. Thanks to the change, such companies can benefit from the development tax credit, and taxpayers can deduct the value of tangible assets and eligible intangible assets acquired from a company in difficulty during the aforementioned 2-year period as eligible expenses.
Although already in force from 1 January 2022, the change is still relevant in that it development tax credit rules have been made more favourable for small and medium-sized enterprises:
- Small businesses can now claim the tax relief for investments of at least HUF 50 million (previously: HUF 200 million).
- Medium-sized companies can benefit from the discount even for investments worth HUF 100 million (previously HUF 300 million).
Energy efficiency tax credit
In addition to the above-mentioned amendment of the aid intensities, the amendment affected the rules of the energy efficiency tax credit in two respects: similarly to the development tax credit, the definition of a company in difficulty has been amended, and the new provisions can be applied to investments and renovations started before the entry into force of the amendment in March, but already in 2022.
If you have any questions or comments about the above, or if you are concerned about changing legislation, the Moore Hungary tax advisory team is ready to help.
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