Tax allowance for investment in the transition to a net zero emission economy
Tax allowance may be claimed on a temporary basis until 31 December 2025 in the following cases:
- the manufacture of equipment necessary for the transition to a net-zero emission economy, namely batteries, solar panels, wind turbines, heat pumps, electrolysers and equipment for carbon capture and storage;
- the manufacture of key components designed for the manufacture of the aforementioned equipment and used primarily as direct inputs; and
- the production or recovery of critical raw materials for the production of equipment and key components as defined in the previous two points.
The rate of tax allowance, taking into consideration other state aid as well, may be 15 or 35 % of the value of the investment, depending on the location of the investment. The aid intensities may be increased by 20 and 10% points for small and medium-sized enterprises respectively.
Among others, one of the conditions for the tax allowance is that the taxpayer submits an application to the minister responsible for taxation before the investment is made.
Tax allowance for research and development activities
From 2024 onwards, a new tax allowance will be available, called R&D tax allowance.
The tax allowance is based on the direct (own) costs of basic research, applied (industrial) research and experimental development in the accounting sense. The tax allowance is available for the tax year in which the eligible costs are incurred and for the following 3 tax years, up to the amount of the calculated tax. In the fourth tax year following the tax year in which the eligible costs were incurred, the balance (unused tax credit) is paid to the taxpayer in cash.
One-off tax amnesty on registered shareholding
When acquiring a share, it is possible to register the share under registered shareholding with the tax authority within the time limit specified by law. The most important benefit of registered shares is that the gain on the sale of the registered shares after continuously holding the shares for 1 year is exempt from tax.
In case of a shareholding that is not a registered holding as of 30 December 2023, the taxpayer may obtain the status of a registered shareholding at its option by filing the relevant declaration by the deadline for filing the annual corporate income tax return for the tax year 2023.
If the taxpayer makes use of the registration option provided by the above amnesty, the 9% corporate income tax shall be declared and paid on 20% of the positive difference between the market value applied between unrelated parties and the book value as of 31 December 2023, the deadline for which is also the filing of the annual return.
Limitations on the deductibility of royalty and interest payments
The corporate income tax provisions are extended with a new limit on the deductibility of expenses. Under the new provision, royalty and interest payments to countries that are included in the EU list of non-cooperative countries and territories, or that are classified as zero or low tax rate jurisdictions (which include any jurisdiction where the statutory corporate income tax rate is lower than the Hungarian corporate tax rate) are not deductible. The deductibility of the payment is prohibited to the extent that the foreign person or establishment has not paid the tax corresponding to the corporate income tax.
The criteria for non-deductibility shall be documented and examined on a cost-by-cost, expenditure-by-expenditure basis each tax year.
Removal of the limitation on the deductibility of advertising expenses
Under the previous legislation, advertising costs exceeding HUF 30 million in a tax year were not deductible if the taxpayer did not have a statement from the advertising service provider that it was in compliance with its advertising tax obligations or had no obligation to pay advertising tax.
The above limitation will be removed, as it will still be sufficient to determine whether the cost of advertising activity serves the purpose of the business, depending on the business content.
Loss carry-forward
The limitation effective until 31 December 2030 on loss carry-forwards for losses incurred before the tax year 2015 is removed. As a result, these losses can be carried forward indefinitely and the time limit for their use has been removed.
