Hungary strengthens its competitive tax environment

Hungary has taken another step to support businesses and strengthen its competitive tax environment. On 18 November 2025, the Hungarian Parliament passed a new Act (“the Act”) designed to reduce the tax burden and simplify administration for companies. The goal is clear: maintain one of Europe’s most attractive tax systems while encouraging investment and sustainable growth.

What does this mean for businesses? The Act introduces new tax incentives for clean technology projects, environmental protection investments and energy infrastructure modernisation.

In this Client Alert, Senior Associate János Pásztor and Associates Bence Kálmán and Bálint Apáthy outline the key changes with regard to available tax incentives.

1. Change in the development tax allowance

One of the main objectives of the new Act is to comply with EU tax and state aid law, given that the EU Crisis Communication will cease to apply from 2026. Consequently, the development tax allowance will no longer apply to investments that are strategically important for the transition to a net-zero emissions economy.

Pursuant to the Act, Act LXXXI of 1996 on Corporate Tax and Dividend Tax (“CIT Act”) will be amended to include a new ground for development tax allowance. Starting in 2026, this incentive will apply to investments that increase production capacity for clean technologies. Eligible projects include:

• manufacturing of final products and key components listed in Annex II of the European Commission’s Clean Industry Framework, including production using recycled materials; and
• production of new or recycled critical raw materials needed for these products.

This tax incentive will be available with a maximum aid intensity of 15% in Budapest and 35% in rural areas, taking into account the rules on the cumulation of aid relating to state aid linked to the same eligible costs, in whole or in part.

A further condition for claiming the incentive is that the investment would be carried out outside the European Economic Area (“EEA”) without the aid.

2. Tax incentives for investments and renovations aimed at eliminating environmental damages and other specific environmental protection objectives

Companies are eligible for a corporate tax allowance when they undertake investments or renovations with a present value of at least HUF 100 million aimed at specific environmental objectives. These objectives include eliminating environmental damage (e.g. soil or water contamination), rehabilitating degraded natural habitats and ecosystems, protecting or restoring biodiversity and implementing nature-based solutions to mitigate or adapt to climate change.

The tax benefit can be claimed either in the tax year when the project is commissioned or in the following year and it remains available for up to five consecutive tax years. The maximum allowance depends on the type of project: for environmental damage removal and habitat rehabilitation, it can cover 100% of eligible costs, while for biodiversity and climate-related projects, it can cover 70% of eligible costs, subject to a cap of €30 million. Small and medium-sized enterprises may receive an additional increase of 10–20 percentage points with regard to biodiversity and climate-related projects.

Eligibility requires prior notification to the minister responsible for tax policy before the project begins and compliance with detailed rules to be set out in a ministerial decree. Certain projects and companies are excluded, such as businesses in financial distress, projects related to disaster recovery or those linked to power plant closures. The allowance cannot be combined with other tax incentives for the same project and the tax authority will conduct at least one compliance audit within three years of the initial claim for this tax allowance in respect of the project.

3. New Robin Hood tax allowance for energy infrastructure upgrades

Starting from the 2026 tax year, electricity distribution network operators (“DNOs”) subject to the income tax on energy suppliers (commonly known as Robin Hood tax) will be eligible for tax allowance on investments commenced after 31 December 2025 to modernise energy infrastructure.

The tax allowance is available in the tax year in which the energy development investment is put into operation and in the following five tax years. The amount of the tax allowance, calculated at present value, may not exceed 50% of the difference between the eligible cost of the investment and the adjusted depreciation. Eligible cost is defined as the acquisition value of tangible assets and intangible goods serving the purpose of the investment, reduced by any non-repayable grants. Adjusted depreciation means the depreciation recorded for the energy infrastructure, reduced by the impact of such grants. An additional condition is that the assets must be operated and used for at least five years following the commissioning of the investment.

To qualify for the discount, the professional indicators to be specified in a ministerial decree must be met and an investment incentive certificate issued by the Hungarian Energy and Public Utility Regulatory Authority (“HEPURA”) must be obtained. The application must be submitted to the HEPURA, which shall issue its decision on the application within 15 days. The details of the certificate and the amount of the discount claimed must be indicated in the tax return for each investment. The tax authority will conduct at least one compliance audit within three years of the initial claim for this tax allowance in respect of the investment.

Conclusion

The Act represents a significant step toward aligning Hungary’s tax framework with EU requirements while maintaining its competitive edge. By introducing targeted incentives for clean technology investments, environmental protection projects and energy infrastructure modernisation, the legislation provides businesses with new opportunities to reduce their tax burden and support sustainable growth.

Companies planning major investments should carefully review the eligibility criteria and compliance obligations to maximise the benefits under these new rules. Wolf Theiss’ Tax, Energy and other Practice Groups are available to assist with the legal aspects of these incentives and related projects, as well as provide comprehensive support throughout the entire investment process.