Amendment to tax incentives and tax credits for investments with energy efficiency targets

On 13 March 2022 the Hungarian Parliament approved an amendment to the Corporate Income Tax Act that modified the regulation of investment tax incentives. Based on the amendment, the only requirement to claim the investment tax credit is that the investment should be an initial investment implemented by a small and medium-sized enterprise, or is realized by a large company in the Northern Hungary, Northern Great Plain, South Great Plain, South Transdanubia, Central Transdanubia or Western Transdanubia regions. Mainly the Pest County region will benefit from the amendment, as the tax credit can be claimed after the investment projects realized in the whole region.

Based on to the amendment of the regional support map entered into force as of 2022, the intensity on tax credits on investments, renovations to comply with energy efficiency targets have also been modified. Taxpayers shall be eligible for tax allowance in connection with an investment or renovation to comply with energy efficiency targets upon placing the investment / renovation into operation in the tax year following the year when the investment / renovation was placed into operation and in the following five tax years.

The tax allowance claimed by the taxpayer for any investment / renovation in Budapest may not exceed 30%, while in the Northern Hungary, Northern Great Plain, South Great Plain, South Transdanubia, Central Transdanubia or Western Transdanubia regions, or in the Pest plan-statistical region may not exceed 45% of the eligible costs of the investment at present value, including all state aid requested for the investment / renovation or maximum the HUF equivalent of EUR 15 million.

The new rules entered into force 3 days after its approval, however, due to the changes of the state aid regulation, they will be applied also on those announcements which had been submitted until 31 December 2021 but have not been registered or approved until the amendment entered into force.