As we reported in a previous publication, on June 5, 2023, the draft legislation for the amendment of the government decree on the appropriation of the chapter earmarked for investment promotion (VIP cash grant) became available. Following the social consultation, the amendment of the government decree was officially published in the Hungarian Gazette on August 3, 2023, thus providing significant and favorable changes for businesses.
In this publication, the BDO Hungary FDI Advisory team would like to draw your attention to the changes affecting the non-refundable grant system for investments.
Changes related to the eligibility criteria:
Pursuant to the amendment of the government decree, if the eligible cost of an investment to be implemented by a company reaches 3 million euros in any location within Hungary, the investor may be entitled to for a non-refundable cash subsidy regardless of the size of the company (SME or large enterprise).
Exceptions to the above are:
- every district seat and certain county seats (Salgótarján, Miskolc, Nyíregyháza, Békéscsaba, Pécs, Kaposvár and Szolnok), where the minimum criteria is EUR 5 million, as well as
- the most developed county seats (Győr, Székesfehérvár, Tatabánya, Szekszárd, Kecskemét, Szombathely, Veszprém, Debrecen, Szeged, or Eger), where companies with an investment of at least 10 million euros may be eligible for the subsidy.
Eligibility criterion of the VIP Cash Subsidy
The amendment of the government decree also provides an opportunity to gradually reduce the collateral amount used as a guarantee of the grant during the monitoring period, which can result significant cost savings for businesses.
Introduction of a new incentive scheme:
On July 28, 2023, the European Commission officially announced that it had approved a Hungarian incentive scheme aimed to promote the transition to a climate-neutral economy. The aim of the incentive scheme is to ensure that the investments required for transition to a net-zero economy are realized by businesses within the European Economic Area (EEA) and that they are not attracted by other subsidy measures introduced by third countries (e.g. the US inflation reduction act).
According to the new incentive scheme those investments can be subsidized that are primarily related to the production of heat pumps, batteries, solar panels, and to the production and recovery of raw materials for the above-mentioned elements.
The subsidy ratio in Budapest is a maximum of 15% (the maximum subsidy amount is 150 million euros) while in settlements outside of Budapest, the maximum aid intensity is 35% (the maximum subsidy amount is 350 million euros).
Incentive agreements related to the new subsidy scheme must be concluded by December 31, 2025, therefore it is recommended to submit the applications as soon as possible.
Should you consider a new investment in the near future, and you are interested in one of the above options, our BDO FDI Advisory's state aid team is ready to assist you.
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