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Incentive opportunities for investments and activities in intralogistics in Hungary
In Hungary, a wide range of grants and incentives are available, such as cash grants and tax incentives for CAPEX, OPEX, or energy efficiency investments, grants and incentives for research and development, and other periodically available grants, most of them are available for intralogistics related activities.
The main incentives available are the following:
CAPEX VIP cash grant
This non-refundable grant, administered by HIPA, supports investment projects (e.g. warehouse establishment/expansion) with maximum aid amounts ranging from EUR 24.75 to 49.5 million, depending on the project's location, with the exact aid amount depending on individual government decision (higher grant amount is also available but European Commission approval is needed). Designed to boost investments of both emerging and mature enterprises, it is available year-round, predominantly outside Budapest. To obtain the grant, certain commitments shall be met for the 3 or 5 years of the monitoring period (maintenance of investment and headcount, increase in sales revenue and / or wage costs). Key eligible costs encompass new equipment and property investments. the grant also supports the creation or expansion of SSCs with a minimum of 25 new jobs, covering 24 months of personnel costs for new employees. In addition to the CAPEX investments, up to 50% of the eligible costs can be allocated to supplementary energy investments, such as the production and storage of renewable energy, with a maximum intensity of 45%.
Development tax allowance (DTA)
This tax allowance provides substantial corporate income tax relief for implementing certain projects. It can be utilized up to 80% of the tax payable each year over a 13-year period, with maximum combined aid amounts ranging from EUR 24.75 to 49.5 million depending on the project's location (higher grant amount is also available but European Commission approval is needed). The Ministry of Finance shall be notified before starting the investment, and certain commitments, such as job maintenance, shall be met. The DTA is available year-round, mainly outside Budapest, and supports both investment (e.g. warehouse establishment/expansion) and job-creation projects, with eligible costs covering property investments, new equipment, and personnel costs. This incentive offers a significant opportunity for businesses to reduce operational costs while contributing to regional development and job creation.
Energy efficiency tax allowance
This allowance offers a corporate income tax relief up to 70% for investments or renovations serving energy efficiency purposes, resulting in the reduction of final energy consumption. Eligible costs include investments solely for energy efficiency, the cost difference between energy-efficient and less energy-efficient options, and the costs of energy efficiency improvements minus maintenance costs. Energy efficiency investments for buildings must lead to a minimum 10-20% decrease in primary energy consumption. The incentive can be utilized up to 70% of the tax payable over a six-year period, with up to EUR 30 million per project, and aid intensity reaching 30% in Budapest and 45% outside. Examples of eligible projects in the sector could include the modernization of lighting and heating systems, insulation of buildings or warehouse automatization resulting in reduced energy consumption.
Research and development incentives
For research and development activities, for example at warehouse automation or at other intralogistics areas, companies might be eligible for various R&D grants and allowances.
There are several incentives in corporate income tax (9%) available for R&D activities, such as tax base reduction for the direct costs of the R&D activities and IP, and accelerated depreciation of intellectual products. A similar tax base reduction is also available in business tax (up to 2%). Moreover, the innovation contribution (0.3%) tax base can also be reduced by the direct costs of R&D activities. Additionally, the social contribution tax payable could be reduced by 50%, based on wage costs identified as direct R&D costs, but in that case, the corporate income tax benefit cannot be utilized.
Furthermore, a new R&D corporate income tax allowance has been introduced. The amount of the allowance is up to 10% of the eligible costs, and if it is not utilized within four years, it will be paid out in cash by the tax authority. Taxpayers can either use this tax allowance or the previous R&D tax allowances, and once this regime is chosen, it is binding for five years. This allowance is also fully applicable to taxpayers under the global minimum tax regime.
Additionally, a cash grant, called R&D VIP cash grant is available for R&D projects of large enterprises or middle sized enterprises. The projects shall entail a minimum cost of EUR 1 million with a requirement to increase R&D headcount by at least 10 persons within the duration of the project (1-3 years). The R&D nature of the project(s) must be verified by the NRDIO (National Research, Development and Innovation Office) for the conclusion of the grant agreement. Additionally, there is a mandatory employment period of two years for both base and newly created R&D headcount after project completion. The grant may cover up to 25% or 50% of eligible project costs, with the exact amount based on an individual government decision.
In conclusion, Hungary offers a vast number of opportunities for businesses looking to invest in intralogistics and other related fields. By leveraging these incentives, companies can greatly enhance their operational efficiency.
Should your company be interested in pursuing these opportunities or have any incentive-related questions, feel free to contact our colleagues!