Grants and Incentives

Tax Incentives and State Aid

Tax incentives and state aid are key tools of economic development: they provide targeted encouragement for investment, innovation and productivity growth while supporting job creation, training and the transition to energy efficiency. For companies, this translates into tangible financial benefits in the form of a lower tax burden, improved cash flow, better project returns and faster implementation. Whether the project involves R&D, capacity‑expanding investment or sustainability upgrades, domestic and EU programmes, together with various tax incentives, can become strategic pillars of financing.

Selecting the right support scheme requires professional preparation and compliance: eligibility criteria, cost eligibility, maximum aid intensity and cumulation rules are complex, and both EU and domestic legal frameworks demand precise documentation and ongoing monitoring. The process therefore starts with mapping the opportunities and modelling the return on investment, continues with preparing the application/claim documentation and engaging with the authorities, and runs through to project monitoring. A well‑designed incentive and state‑aid strategy not only yields short‑term financial benefits, but also strengthens the company’s competitiveness over the long term.

Room to manoeuvre even without EU funds: tax incentives and targeted domestic schemes

In recent years, the supply of calls for proposals offering non‑repayable cash grants has narrowed considerably. Daily calls and notifications typically show few opportunities and very narrow target groups, while the budgets of announced programmes (e.g. the Factory Rescue Programme) can be exhausted within minutes. In this environment, corporate investment planning should not rely exclusively on such sources. In practice this means companies should complement or, where necessary, substitute direct grants with other incentives—first and foremost, tax incentives.

Tax incentives generally do not qualify as cash‑based support; rather, they reduce the corporate income tax payable in future periods, which means profitable operations are needed behind them. In return, they can support the same project scope and aid intensity as direct state aid—and within the rules, even higher aid intensity can be achieved. Experience shows that the previously generous grant environment “weaned” companies off the conscious use of tax incentives, even though investment activity continues. It is worth bringing a tax‑incentive‑based financing logic back to the forefront.

SME status and location: the keys to access

In Budapest, the development tax allowance is available on a more restricted basis, whereas energy‑efficiency and R&D‑related incentives are also accessible in the capital, particularly for SMEs. SME status must be assessed at group level and requires continuous monitoring. The main thresholds are: <250 employees and ≤ EUR 50 million turnover or ≤ EUR 43 million balance sheet total. A frequent mistake is failing to track this status proactively—even though eligibility and aid intensity may depend on it.

Corporate income tax incentive for energy‑efficiency investments: simpler rules, compelling numbers

Today the energy‑efficiency tax incentive is one of the most tangible opportunities: as a rule of thumb, 30% aid intensity is available in Budapest and 45% outside the capital (i.e. for an investment of 100 units the tax allowance is 30/45 units), which can be increased by 10/20 percentage points for SMEs. A recent simplification is that where the primary objective is energy efficiency, there is no need to justify the incremental cost compared to an alternative investment; the entire investment/renovation cost can be eligible. There is also a simplified route, where the intensity is halved (for large enterprises: 15% Budapest / 22.5% outside Budapest), but the administrative burden and documentation risk are significantly lower. Verifying the final energy savings (with an energy auditor) is essential, but there is no minimum investment value. To take an extreme example: even replacing laptops with more energy‑efficient models can fall under this category.

Aid granted on the basis of an Individual Government Decision (so-called VIP cash grant): not only for “mega‑factories”

Many associate the VIP cash grant with large greenfield projects, yet the minimum investment threshold has recently been reduced to EUR 2 million in several regions. This makes the VIP cash grant a viable option for smaller‑scale investments as well. Moreover, this grant can be combined with tax incentives: for example, alongside 30% VIP cash grant, a development tax allowance may also be claimed up to the regional maximum aid intensity applicable to the location.

What should you do now?

In the current economic environment, the first step of project planning should be to map applicable tax incentives (location, SME status, activity, energy‑efficiency objectives, R&D profile). Where relevant, the VIP cash grant and the less frequent domestic targeted schemes should also be considered. Even in the absence of EU funds, this approach can assemble a financially robust funding mix that tangibly improves project returns and deliverability.

Which types of investment may qualify for tax incentives or cash grants?

R&D activities or investments in assets serving R&D activities
Training‑related costs (both in‑house and external)
Investments serving product manufacturing, real estate or software development
Investments for energy‑efficiency or environmental purposes

What other incentives are available?

Our team of specialists is there to assist you with identifying and obtaining state aids in the form of cash grants or tax incentives.

We are offering location advisory services providing support for investment location selection process in Europe consisting of location study and comparative analysis of incentives
We provide assistance with identifying investments and R&D activities qualifying for tax credits and subsidy incentives
Our services cover the assistance in accessing state aids, maximizing tax benefits, negotiating with authorities, managing and coordinating application process
We may review of utilized state aids and tax credits and related costs, advising on the optimal utilization of available incentives

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