New VIP incentive schemes to be introduced
New VIP incentive schemes to be introduced
The proposal for the amendment of the decree on incentives granted on individual governmental decision (EKD) has been published by the Ministry of Foreign Affairs and Trade, the proposal aims to introduce two new VIP incentive schemes. The Ministry has released the proposal for public debate. We have summarized the most important aspects of the proposal:
1. What type of new schemes will be introduced?
The proposal expands with 2 new incentive schemes the currently existing options:
- Profit repatriation incentive
- VIP cash grant for GloBe subjects
2. Profit repatriation incentive
The aid can be utilized by both SMEs and large enterprises if (among other conditions) they own more than 50% ownership of a foreign subsidiary which subsidiary has at least two completed financial years.
The aid might be granted upon the applicant undertakes to realize an asset-based or supplementary energy investment or the establishment of a regional service center. Investments shall be considered as eligible if they are realized outside the territory of Budapest. It is also necessary to repatriate dividends generated by the foreign subsidiary to Hungary.
For asset-based and job-creating investments, the aid intensity shall be defined according to the regional map.
The aid shall be deemed as a post-financed cash grant however a 30% down payment can also be requested.
3. VIP cash grant for GloBe subjects
The aid might be utilized by those large enterprises which consolidated financial statement revenues of EUR 750 million or more in two of the four fiscal years immediately preceding the tested fiscal year.
The subsidy shall be applicable in case of asset-based and job-creating investments outside the territory of Budapest, upon the investment exceeds the EUR 55 million. The amount of the subsidy shall not exceed 5% of the pre-tax profit decreased with the amount of the dividends (as determined in the annual financial report). The aid might be utilized for 10 years from the date of completion of the investment (subject to the existence of a positive pre-tax profit before dividends).
4. What other changes occur as a result of the amendment?
Upon entering into force, the proposal will implement further significant changes regarding the currently available incentive schemes:
- a) In case of asset-based or job-creating investments under regional title, the investment threshold from the current EUR 100 million shall be increased to EUR 110 million. With the current year's modification of the regional aid intensity map, this means that in certain counties, a maximum cash grant of up to 49.5 million euros will be available without the prior approval of the European Commission.
- b) Regarding R&D investments the aid intensity will remain in 25% in Budapest, however in rural settlements it will be increased to 40%. At the same time if the project also includes applied (industrial) research, the aid intensity for applied (industrial) research can reach 50%. Another important change is that the maximum amount of aid is increased to EUR 25 million from the current EUR 15 million.
- c) In case of the training subsidy scheme the maximum available incentive amount will be increased to EUR 3 million from the current EUR 2 million.
- d) Regarding supplementary investments dedicated to renewable energy the maximum aid intensity will be increased from 30% to 45% and the maximum aid amount will be increased to EUR 30 million from the current EUR 15 million.
- e) Upon certain conditions are met the aid for supplementary investments dedicated to renewable energy the energy production & storage and the storage on its own becomes eligible. Additionally, aid can also be provided for the production and storage of biofuels, liquid bioenergy carriers, biogas, biomass, and renewable hydrogen.
5. When will the proposal enter into force?
The proposal has been published on the 11th December 2023 and within 8 days from the date of publication, comments might be submitted. The amendment shall enter into force on the day following its publication in the Hungarian Gazette, and it is not excluded that it may be published in the Gazette within the current year, especially considering that the proposed effective date for several provisions is 1 January 2024.