Hungary

R&D Credit, Super Deduction and Patent/Innovation Box

Cash grants and tax incentives are available for eligible R&D infrastructural investments and R&D project costs. The Hungarian R&D incentive regime has the potential to be beneficial for a wide range of investors depending on their fact patterns and business goals. In addition,  many of the elements of the Hungarian incentive system may be combined to achieve the most advantageous results.

Description of Incentive

Super Deduction:

200% super deduction for qualifying expenditure if R&D activities which are ensued within scope of taxpayers business – i.e. performed with regular tools and employees.

Patent Box:

Where IP is generated due to R&D activities, 50% of the gross amount of royalties received may be deducted from the corporate income tax base upon the taxpayer’s election.

Eligibility Requirements

Hungary has a broad eligibility criteria and it is not limited to certain industries.  Furthermore, qualifying expenditures are widely defined and include all direct costs incurred in R&D.

Typical eligible costs include:

• Gross wage of R&D/marketing staff
• Cost of new equipment
• Cost of goods/materials/R&D services purchased from third parties

One particularly positive factor is that the IP generated is not restricted to remain in Hungary. Additionally,  incentives are accessible to foreign entities without permanent establishment. This is aimed to entice positive tax planning to multinational groups. Lastly, tax incentives can be claimed by Hungarian companies subcontracting R&D services to a related foreign party.

Other Considerations

R&D benefits are able to be claimed retrospectively within the statue of limitations. The R&D qualification guidelines are currently under review with encouraging outcomes to the taxpayer expected.

Services

Swanson Reed offers the following services:

• Advice on tax preparation relevant to claiming the R&D tax credits incentive
• Preparation of documents relating to filing and substantiating a R&D taxation claim
• R&D tax advice and consultations
• R&D tax claim planning and preparation

For a full range of services in relation to the credit, please click here.