The European Commission amends the regional aid map for Hungary

On 12 May 2023, the European Commission announced in a press release that it had amended the so-called ‘regional aid map’ for Hungary for the period from 1 January 2022 to 31 December 2027.

What is the regional aid map?

The regional aid map determines

• in which regions of Hungary new investments are eligible for regional investment aid (e.g. in Hungary the VIP cash grant based on an individual government decision and the development tax allowance uses regional investment aid, but regional investment aid is also granted under other measures), and
• the maximum intensity of this aid, i.e. the maximum proportion of the investment costs of the project that can be contributed by government entities, e.g. through cash grants, tax credits or soft loans.

Currently, the whole of Hungary is included in the map, except for Budapest, i.e. regional investment aid can be granted in all areas outside the capital. According to the regional aid map approved in 2021, a maximum intensity of 50% was available in Pest county and in the regions of the Southern Great Plain, Southern Transdanubia, Northern Great Plain and Northern Hungary, and 30% in the regions of Central Transdanubia and Western Transdanubia. For small and medium-sized enterprises (SMEs), if the eligible costs of the investment do not exceed 50 million euros, the intensity can be further increased (by 20% for small enterprises and 10% for medium-sized enterprises).

What has changed?

Under a European Commission decision of 12 May 2023, regional investment aid can be granted at a 10% higher intensity in Baranya, Borsod-Abaúj-Zemplén and Heves, i.e. the three counties of Hungary most affected by the green transition (i.e. the phasing out of coal and lignite mining and of the energy production based on these fuels).

What are the practical consequences of the changes?

The most important consequence is that the maximum aid intensity will rise to 60% in three counties within two 50% regions (Northern Hungary, South Transdanubia), so new investments to be implemented in these counties could receive a higher proportion of state support. Since the rules for the SME bonus still apply, as a result of the amendment, a small business in the three counties will be able to receive regional investment aid with an intensity of up to 80%.

The increase in intensity also means that the amount of aid below which no notification to and approval by the European Commission is required is to be increased. Up until now, this amount has been 37.5 million euros in 50% regions, but in the future it will be 45 million euros in the counties of Baranya, Borsod-Abaúj-Zemplén and Heves (these amounts are expected to increase further due to other changes to the EU legal framework that are expected to be promulgated in the near future).

It is important to note, however, that the above changes only represent a modification of the EU regulatory framework: they will not be immediately and automatically applicable in Hungarian state aid policy, but only when the Hungarian legislation governing the regional aid map is amended by the Government, and the changes will be implemented in the domestic regulation of the various aid schemes.

If a beneficiary has already applied for aid before the amendment of the map but has not started the project yet, it may submit a new application under EU rules for a higher available intensity (but the specific rules of each national aid scheme may impose stricter conditions).