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Hungary: Allowances for special enterprise zones

From 1 January 2013, the scope of tax allowances available to companies operating in special or free enterprise zones was extended in a number of tax types.

Pursuant to the Act on Corporate Income Tax and Dividend Tax, special enterprise zones are zones appointed by the Government, coordinated by the regional economic development organisation and managed jointly from a development perspective. In accordance with the government decree promulgated on 12 February 2013, 903 communities of Hungary will become special enterprise zones1. Below are more details on the tax allowances available to taxpayers operating in these special enterprise zones.

Development tax allowance

The taxpayer is eligible for this tax allowance if they operate an investment of at least HUF 100 million at present value within the territory of the special enterprise zone. The tax allowance is subject to the condition that the investment must result in the creation of a new facility, the extension of an existing facility or a fundamental modification of the produced products, provided services or the production or service process.

The conditions of applying development tax allowance were altered from 1 January 2013. From this date, the taxpayer shall report the date of completion of the investment to the minister responsible for tax policy within 90 days of the start of the  investment. Similar to the previous year, certain data will have to be reported before the commencement of the investment. If the tax allowance is available on the basis of a Government licence, a request for the given tax allowance shall be submitted with the respectively prescribed content and in the prescribed form.

Social contribution tax allowance

The taxpayer operating within the territory of a special enterprise zone is eligible for this tax allowance if it qualifies as a taxpayer eligible for development tax allowance, as defined in the Act on Corporate Income Tax and Development Tax, and it increases its headcount relative to the average statistical headcount of the month preceding the start of the investment eligible for the development tax allowance.

The social contribution tax allowance may be applied from the month of the start of the investment eligible for the development tax allowance at the earliest, for a period of no more than five years.

The partial allowance which may be applied is 27% of the gross salary but the maximum of the tax basis is HUF 100,000 in the first two years of employment of the newly hired employee.This  reduces to 14.5% in the third year of employment.

Vocational training contribution allowance

The basis of the vocational training contribution is the basis of the social contribution tax. From 1 January 2013, the vocational training contribution base may be reduced with regard to newly hired employees employed by an enterprise operating in a special enterprise zone, provided that the enterprise in question also applies social contribution tax allowance. The tax allowance may be applied in the first two years of employment on a tax base of up to HUF 100,000 for each newly hired employee.

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