Incentives in the Hungarian tax system and direct funding for R&D projects

News – 05.03.2026

The available R&D incentives fall into three main categories: tax base and tax allowances related to research and development activities, benefits related to the use of the resulting intellectual property, and direct financial support.

R&D incentives

Tax incentives for ongoing R&D activities

R&D allowances applicable to the corporate tax base

R&D costs can be taken into account twice in the corporate tax base. This means that the direct R&D costs are first recorded in the accounting records, and then they can be deducted once again from the calculated corporate tax base. A condition is that the research and development is carried out within the taxpayer’s own scope of activity.

If the research activity is carried out in cooperation with

higher education institutions,
the Hungarian Academy of Sciences (MTA),
the HUN-REN Hungarian Research Network,
research institutes operating as central budgetary agencies,
research institutes jointly established by them,
with research institutes operating as economic organizations that are directly or indirectly majority-owned by the state, an even greater deduction is available – up to 400% per year – up to a maximum of 50 million forints.

However, pre-tax profits cannot be reduced by non-refundable and other state subsidies spent on development purposes.

Local business tax base allowance for direct R&D costs

The same amount can also be deducted from the HIPA tax base as from the corporate tax base.

Development tax incentive: R&D activities may also be eligible

The development tax incentive is a benefit that can be directly deducted from corporate income tax and may provide an effective tax rate of as low as 1.8% for eligible taxpayers. It can be claimed for up to 13 years (or up to 16 years from the start of the investment) in the form of retaining up to 80% of the payable tax. Basic research, applied research, and R&D activities alike may all qualify for access to this highly favourable opportunity.

Conditions:

minimum investment value: HUF 100 million,
prior notification to the tax authority,
operating obligation for the period specified in the legislation
consideration of aid intensity limits.

However, the drawback of the incentive is that it significantly reduces the effective corporate tax burden; therefore, for companies subject to the global minimum tax, it must be carefully considered whether it is worthwhile to make use of it.

Global minimum tax-compliant R&D incentive

Precisely because of the effective tax rate relevant from a global minimum tax (GloBE) perspective, a new R&D tax incentive has been introduced. This does not reduce the effective tax rate; instead, it is recognized as other income and thereby increases GloBE income. As a result, the effective tax rate is less likely to fall below 15%, and it does not lead to additional tax liability due to the global minimum tax. This R&D incentive can only be applied to R&D projects started after January 1, 2024, and it cannot be combined with earlier R&D incentives.

A tax credit equal to 10% of eligible costs may be deducted from the calculated tax; however, more favourable rules may apply in certain cooperation arrangements. In the case of research carried out in cooperation with a higher education institution, the Hungarian Academy of Sciences (MTA), a central budgetary or other specialized research institute, or with the involvement of the HUN-REN Hungarian Research Network, up to 100% of the costs may be deducted, up to a maximum of HUF 500 million.

At the same time, the tax credit may not exceed:

EUR 55 million in the case of basic research,
EUR 35 million in the case of applied research,
EUR 25 million in the case of experimental development.

Up to 100% of the corporate tax payable may be claimed, or if it exceeds that amount, it may be reclaimed in cash.

Eligible costs may be taken into account in the year in which they are incurred and in the following three tax years:

depreciation of tangible assets calculated for the duration of the project;
personnel costs (excluding indirect costs such as entertainment and severance costs);
costs and expenses related to used patents;
operating and maintenance costs.

Projects may not exceed five years in duration.

The old R&D incentive system and the development tax allowance for R&D support are generally more favourable for companies that are not subject to GloBE. The choice of the new tax incentive must be indicated in the tax return for the first year of application, and a return to the old system is only possible from the 6th tax year following the year of the election.

Social tax allowance

In the case of employing personnel involved in research and development activities, a social tax allowance may be claimed. However, the same costs cannot also be taken into account as an item reducing the corporate income tax base or the local business tax base.

Incentives available after the completion of the development

R&D incentives related to royalties

In corporate income tax, royalties are defined as revenues derived from patents, utility models, plant variety protection, supplementary protection certificates, patented topographies of microelectronic semiconductors, or software protected by copyright, as well as from medicines for rare diseases, and furthermore from the sale of such rights, in-kind contributions, or the provision of goods and services related to them. Some incentives are specifically linked to profits arising from royalties.

However, this definition does not fully coincide with the concept of royalties used in the local business tax. In that context, royalties mean any (consideration-based) income received for the authorisation to use or exploit patents, utility models, plant variety protection, supplementary protection certificates, patented topographies of microelectronic semiconductors, or copyright-protected software, as well as for the sale of the exclusive rights listed above.

The incentives are only available if there is a direct link between the income benefiting from the relief and the related expenses. In all cases, it must be taken into account to what extent the taxpayer has contributed to the development of the intangible asset in question.

Corporate tax base allowance for royalty income

50% of royalty profits reduce the tax base, but only up to 50% of the positive pre-tax accounting profit; and if the asset generates a loss in the following tax year, then 50% of that loss increases the tax base.

Exemption of royalty income from local business tax and innovation contribution

Royalty income is exempt from local business tax and innovation contribution.

R&D incentives related to the disposal of intangible assets

Tax base allowance for reported intangible assets

If the taxpayer notifies the tax authority of the asset within 60 days of its acquisition or recognition as an intangible asset and subsequently holds it among its assets for at least one year, then the gain (profit) arising from its sale or contribution in kind may be deducted from the corporate income tax base.

Tax base allowance for “royalty-generating” intangible assets

If a new intangible asset is purchased or created within the five tax years following the sale, the profit arising from the disposal of “royalty-generating” intangible assets may reduce the corporate income tax base. The additional profit realized from the disposal may not serve as a basis for dividend payments. Compared to the incentive related to reported intangible assets, this option has the advantage that there is no requirement to hold the asset for one year, and there is no obligation to increase the tax base in the case of a loss; however, it requires “continuous development” in order to benefit from it. The two types of incentives cannot be applied simultaneously.