New Hungarian aid scheme is introduced to tackle the economic effect of COVID-19

Detailed information has become available on the new aid scheme approved by the European Commission on 23 June 2020, under which large companies can receive aid over 800 000 EUR, if the large company has suffered a damage as a result of administrative measures taken in connection with the coronavirus outbreak. The Ministry of Foreign Affairs is responsible for the aid, and the aid measure is administered by HIPA Nonprofit Zrt.

The budget of the aid measure amounts to HUF 50 billion, and large companies based in Hungary can apply from almost any industry except primary agriculture, fisheries and aquaculture, and bearing in mind that certain activities (e.g. steel, coal, synthetic fiber-industry, tourism, etc.) are not eligible.

Aid can be applied, if a large company can prove or declare that:

• it was not in difficulty on December 31, 2019;
• it has suffered or will suffer a minimum of 25% decline in turnover or order volume during a specified period between 12 March, 2020 and 31 August, 2020 (compensation period) compared to the same calendar days of the last closed business year (reference period);
• the damage corresponding the difference between the operating profit of the reference and compensation period (different calculation shall apply in case seasonality);
• there is a casual link between turnover or order volume decline, the amount of damage and the administrative measures taken;
• damages incurred cannot be compensated in part or in full in any other way;
• it is not responsible for the economic downturn and has acted with reasonable care;
• implement an CAPEX investment of at least EUR 1 600 000 by 30 June, 2022 at the latest;
• maintain its base headcount number until at least 30 June, 2022.

Relevant governmental and administrative measures are understood as (public)health restrictive measures and recommendations; official quarantine imposed on a large company; restriction of business activity; impossibility of receiving goods and services.

During the evaluation of grant applications, the following aspects will be assessed:

• relative volume of damage (substantiated in a report by an independent auditor that shall be submitted by 31 March, 2021);
• size of the investment;
• the level of economic development of the geographical area where the investment would be realized, as well as the industry classification of the large company's activity;
• base headcount;
• average wage cost.

The aim of the new state aid scheme is to compensate the damage caused by the COVID-19 outbreak and the respective governmental measures, thus the amount of aid cannot exceed:

• the amount of damage,
• 50% of the eligible cost of the investment undertaken.

Eligible costs of the investment are the costs incurred after the submission of grant application; which may be tangible and intangible assets, leasing costs, real estate rental fee and cost of real estate.

Aid can be requested via grant application and a grant contract will be signed by the donor and aid beneficiary. The aid can be disbursed as an advance payment if guarantee is provided, or ex post.

For assistance in applying for the new grant, please contact our professional on the contact details below.