Hungary: Fundamental change in the incentive system: full focus on corporate productivity

Even as the VIP Cash Grant provided by the Hungarian government from national funds is still considered an increasingly attractive incentive for greenfield investments, capacity expansions and R&D projects, the government has now turned its focus towards supporting projects that involve introducing new technologies or even invention.

 

In line with the “Invented in Hungary” investment promotion strategy, new significant amendments have just been made to the VIP Cash Grant system (regulated by Gov. Decree No. 210/2014) to increase the focus on keeping existing jobs and enhancing corporate productivity via Industry 4.0 and research and development projects.

 

1. New criteria to replace job creation

 

As of 1 October 2019, investors will generally not be required to create new jobs.

 

However, after an investment has been completed, the investor must increase the company’s wage expenses by an annual average of €300,000 and increase its sales revenue by an annual average of €3 million compared to the base value, in case of newly established enterprises.

 

Likewise, job creation is not necessary in the case of companies not considered newly established enterprises. Nevertheless, investors must increase the company’s base sales revenue and/or its base wage expenses by at least 30%, or the sales revenue’s and wages’ increase must reach 30% points combined.

 

This growth is to be maintained in the monitoring period as an annual average.

 

2. Favourable modification of thresholds

 

Moreover, for traditional greenfield and capacity-expansion projects, the geographically specified minimum investment amounts have been changed. In counties where the subsidy’s minimum asset investment threshold was €20 million (Győr-Moson-Sopron, Fejér, Komárom-Esztergom and Pest Counties) this threshold has been reduced to €10 million.

 

The previous list of “preferred” geographical areas has also been extended to Baranya County in the Southern Transdanubia region.

 

Accordingly, the minimum eligible investment amount in the modified system will be:

• €5 million in Baranya, Békés, Borsod-Abaúj-Zemplén, Nógrád and Szabolcs-Szatmár-Bereg Counties and

• €10 million in Bács-Kiskun, Csongrád, Fejér, Győr-Moson-Sopron, Hajdú-Bihar, Heves, Jász-Nagykun-Szolnok, Komárom-Esztergom, Pest, Somogy, Tolna, Vas, Veszprém and Zala Counties.