Hungary has two main categories of support which are cash subsidies and development tax incentives. Cash subsidies can take a number of forms where, apart from the location of the investment, there is also a minimum cumulative condition for both the size of the investment (i.e. the amount of eligible costs or the number of jobs created) and the increase in wage costs and sales revenue.
The aid rate may range between 25%-50% of the eligible costs (min. EUR 5/10 million) depending on the region where the investment is located in Hungary. In the case of SME investors, the aid rate may be higher. The purpose of the investment should be:
- starting a new operation;
- initial investment in a new economic activity, resulting in product diversification, or process innovation;
- setting up a shared service centre;
- R&D projects.
The government will decide the amount of the subsidy taking into account factors such as the revenue resulting from the investment, wage increase, the sector concerned, etc. For investments other than R&D, a sales revenue increase is also required. In the case of newly established enterprises, after the investment has been completed, the investor must increase the company’s wage expenses by an annual average EUR 300,000 and increase its sales revenue by an annual average of EUR 3 million compared to the base value.
In the case of enterprises that do not qualify as newly established, investors must increase the company’s base sales revenue or its base wage expenses by at least 30%, or the combined increase in the sales revenue and wages must reach 30%.
Should the government approve the subsidy for a project, the Ministry of Foreign Affairs and Trade concludes an agreement with the investor and reviews the use of the subsidy and the operation of the investments usually for a five-year monitoring period after the investment is finished.
In the case of subsidising high-value investments of over EUR 50 million, approval from the EU Commission is also necessary.