The Hungarian government published the expected modifications of the VIP Cash subsidy system: Projects with EUR 3 million of investment volume will also be eligible in a significant part of Hungary; the obligation of providing collateral will be mitigated as described below; and a new, special subsidy category, which is available in Budapest will facilitate the green transition.
According to the expected amendment to Government Decree No. 210/2014 (VIII.27.) on the Appropriation of the Chapter Earmarked for Investment Promotion (VIP Cash Decree), which is the legal basis of the individual government decision-based VIP cash subsidy, the main changes are the following.
Easing of the eligibility criteria
The most important modification is – compared to the previous entry thresholds of EUR 5 million and EUR 10 million – that in a large part of Hungary, application for VIP cash subsidy can be submitted to the Hungarian Investment Promotion Agency (HIPA) with EUR 3 million of investment volume.
| Eligible cost (EUR million) | City |
| 10 | Győr, Székesfehérvár, Tatabányán, Szekszárd, Kecskemét, Szombathely, Veszprém, Zalaegerszeg, Debrecen, Szeged, Eger |
| 5 | Salgótarján, Miskolc, Nyíregyháza, Békéscsabán, Pécsett, Kaposváron, Szolnokon or any other district centre cities („járásszékhely”)* |
| 3 | In all cities that do not fall into the above mentioned two categories |
| – | Regional investment aid still cannot be granted in Budapest. |
* If a district centre city (“járásszékhely”) qualifies also as a greater centre city (“megyeszékhely”), the higher eligible cost determined in the VIP Cash Decree shall be taken into account as an eligibility criterion.
Introduction of a new subsidy category
Recently eased EU rules allow for more favourable conditions for granting subsidies in sectors that are strategic for the transition to a net-zero emissions economy. This possibility is now being taken up by the VIP Cash subsidy system.
Investors who would, in the absence of the subsidy, carry out their productive investment in a sector of strategic importance for the transition to a net-zero emission economy in a non-European Economic Area (EEA) country, will be eligible for subsidy throughout the whole territory of Hungary (including Budapest).
The following activities will be eligible:
- the production of batteries, solar panels, wind turbines, heat pumps, electrolysers, and equipment for carbon capture, utilisation and storage (CCUS);
- the production of key components designed and primarily used as direct input to produce the equipment defined under the previous point;
- the production or recovery of related critical raw materials necessary to produce the equipment and key components defined above.
The eligibility criteria of the new category are similar to those for regional investment aid. As the main rule, the costs of assets of Article 47 to 51 of the Accounting Act, including costs directly linked to the production and storage of renewable energy, may be eligible.
The maximum amount and aid intensity is defined as follows:
| When granting the subsidy is not subject to the approval of the European Commission | |
| Budapest | 15% of the eligible cost*up to EUR 150 million equivalent in forint (by company group) |
| Outside of Budapest | 35% of the eligible cost*up to EUR 350 million equivalent in forint (by company group) |
* The maximum aid intensity may be increased by a further 20% for small enterprises and by a further 10% for medium-sized enterprises.
If granting the subsidy is subject to approval by the Commission due to exceeding the nationally admissible investment volume, the subsidy can only be granted outside of Budapest. The amount of subsidy cannot exceed the amount that the investor could demonstrably receive for an equivalent investment in a third jurisdiction outside the EEA and cannot exceed the so-called financing gap.
The grant agreement must be concluded by 31 December 2025, therefore the deadline for submitting the grant application is much shorter. It is important to ensure that the grant application is submitted on time, as an individual government resolution needs to be approved for concluding the grant agreement.
Technical amendments
The draft amendment to the VIP Cash Decree foresees the modification of several technical rules.
It introduces, for example, the possibility to reduce the amount of collateral. Some investors may commit to maintain their investment for a longer monitoring period than the ‘minimum’ set under EU law (at least 5 years for large companies and at least 3 years for SMEs) and commit to increase their turnover and/or wages for a longer monitoring period as well. The amendment will allow these investors to apply for a reduction of the amount of collateral provided or to be provided compared to 100% of the subsidy amount.
In the case of an R&D subsidy, the eligible cost range of researchers and developers will be stricter but also clearer. After the entry into force of the amendment, it is expected that only that part of the personal expenses of the researchers and developers will be eligible that covers time spent directly on the supported project. Annual holidays and periods of sick leave are therefore not considered eligible.
This restriction shall be applied to cases pending when the amendment to the VIP Cash Decree enters into force, as well as to grant agreements that have already been concluded, including agreements where the disbursement period has not yet ended.