From January 1, 2024, a new type of research and development (R&D) tax incentive is available within corporate income tax (Act LXXXI of 1996, Section 22/G). The objective of this scheme is to provide a predictable, refundable, and direct financial advantage to companies engaged in genuine R&D activities.
This incentive allows for a reduction in corporate tax based on eligible R&D costs and may offset up to 100% of the corporate tax payable. It takes priority over all other tax incentives and is not subject to the usual 70% or 80% utilization limits.
Form and Amount of the R&D Tax Incentive
- It can be claimed as a direct tax incentive.
- The deductible amount is 10% of eligible R&D costs.
- Utilization period: in the tax year in which the cost is incurred and in the following three tax years.
- Duration: it can be elected for five consecutive tax years; the decision may only be modified from the sixth tax year onward.
- It can be applied up to 100% of the corporate tax payable and takes precedence over other tax incentives.
- If the taxpayer is unable to fully utilize the incentive during the relevant tax year(s), the unused amount may be refunded by the tax authority, effectively converting the tax incentive into a non-repayable subsidy.
Eligibility Criteria
The incentive is available to any company that:
- Has its registered seat in Hungary,
- Conducts R&D activities in its own name and at its own risk,
- Performs activities that meet the criteria of basic research, applied research, or experimental development,
- Has started its R&D project after January 1, 2024.
It is recommended to obtain a professional qualification of the R&D project from the National Research, Development and Innovation Office (NKFIH), especially in the case of larger-scale developments.
R&D Tax Incentive – Eligible Costs
The incentive can be applied to the following costs directly related to the R&D project:
- Personnel expenses
Costs related to the working time employees spend on the R&D project.
- Depreciation of tangible assets (pro rata)
Based on the usage of equipment required for the R&D project.
- Operating and overhead costs
Such as energy costs, materials, rental fees, provided they are directly linked to the project.
- Patent-related costs
Fees associated with intellectual property used in the project.
- Purchased services
Services required for the implementation of the R&D project:
- From non-related parties: eligible up to 20% of total project costs
- From related parties: eligible up to 10%, at arm’s length pricing
- A written declaration from the service provider is required confirming that the service has not received state aid
Application Process
- Identification of R&D activities at project level
- Preparation of technical and financial documentation
- Requesting preliminary qualification from NKFIH
- Claiming the tax incentive in the corporate tax return
- If the full amount cannot be utilized, the remaining balance can be reclaimed from the tax authority.
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