Hungary introduces environmental tax incentive

The laws adopted by the Hungarian Parliament in late November 2025 introduce a number of tax changes as of 2026, including the introduction of a new environmental tax incentive. The amendment enters into force on 1 January 2026 and supplements Chapter III of the Corporate Tax Act with a new subsection regulating a tax incentive for investments and refurbishments aimed at the remediation of environmental damage or other specified environmental objectives.

The purpose of the new incentive is to encourage businesses to undertake sustainable investments, restore the natural environment, protect ecosystems and adapt to climate change. Investments and refurbishments with a present value of at least HUF 100 million (EUR 263,000) are eligible for the incentive if they aim at remediating environmental damage, rehabilitating degraded habitats and ecosystems, protecting or restoring biodiversity or implementing nature-based solutions related to climate change. The incentive may be claimed either in the tax year following the commissioning of the investment or, at the taxpayer’s discretion, in the year of commissioning and the five subsequent tax years.

The rate of the incentive depends on the type of investment and the eligible costs. For the remediation of environmental damage and the rehabilitation of natural habitats, the tax incentive may amount to up to 100% of eligible costs, while for biodiversity protection and climate-related investments, it may cover up to 70% of eligible costs. These percentages may be increased by 20 percentage points for small enterprises and by 10 percentage points for medium-sized enterprises. The maximum amount of the incentive is the HUF equivalent of EUR 30 million per investment and per taxpayer. Eligible costs include the acquisition value of the investment, reduced by the increase in the value of land and other immovable property. For transactions between related parties, eligible costs must be determined at arm’s length.

A prerequisite for claiming the incentive is that the taxpayer must notify the minister responsible for tax policy (i.e. the Ministry for National Economy) before the planned start of the investment, and in the case of environmental damage remediation or habitat rehabilitation, must obtain an independent expert’s certificate verifying the resulting increase in value. The incentive cannot be claimed by the party responsible for the environmental damage, unless the responsible party cannot be identified or cannot be required to bear the costs. The incentive is not available for investments made by undertakings in difficulty subject to liquidation or compulsory dissolution proceedings ordered by a court with final and binding effect, or has filed for voluntary liquidation with the court, for disaster recovery purposes or for the closure of uncompetitive coal mines, and it cannot be combined with other state tax incentives for the same investment or tax year. The tax authority will verify compliance with the conditions of the incentive at least once by the end of the third tax year following the year in which it is claimed.

Overall, the amendment provides businesses with a new opportunity to contribute to environmental protection and climate change mitigation through significant investments, while reducing their corporate tax liability.