According to the Hungarian government’s announcement, the development tax allowance system could undergo significant changes from 2027. In the future, the tax benefits available to large enterprises may be more closely linked to the economic value added generated by their investments. At the same time, the corporate income tax burden on companies with annual revenues exceeding HUF 180 billion could also increase. Although the detailed rules have not yet been published, international practices already offer several examples of how investment incentives can encourage higher-value-added activities. This article examines the expected changes to Hungary’s development tax allowance in 2027, compares the current Hungarian framework with the Czech, Polish and Slovak systems, and explores the potential implications for large enterprises investing in Hungary.
While the detailed rules remain unknown, international examples already demonstrate how investment incentives can be linked to higher wages, research and development, technological advancement and relationships with local suppliers.
The proposed changes could have significant strategic implications for large enterprises investing in Hungary. Currently, eligibility for the development tax allowance primarily depends on the size and location of an investment, its eligible costs and the commitments prescribed by legislation. A value-added-based approach, by contrast, could place greater emphasis on the economic output generated by an investment, the knowledge it creates and its contribution to the competitiveness of the Hungarian economy.
For business executives, it is therefore worth examining regional practices even before the detailed regulations are published. The Czech Republic and Poland provide particularly relevant points of comparison, as both countries explicitly consider the qualitative characteristics of investments when granting investment-related tax incentives. These examples may offer valuable insights for Hungarian large enterprises assessing the expected changes to the development tax allowance in 2027.
This analysis is based on comparative data covering eight countries.
Expected Changes to the Development Tax Allowance in 2027: What Could Change in Hungary?
The central idea behind the proposed policy shift is that the financial value of an investment alone should no longer be sufficient to determine eligibility for government tax incentives. A large capital investment does not necessarily generate substantial domestic value added. Two factory expansion projects involving identical investment amounts may have significantly different economic impacts depending on the nature of their production activities, the qualifications of their employees, whether they conduct research and development locally, and the extent to which they engage Hungarian suppliers.
However, the concept of value added must be interpreted carefully. Economic value added is not the same as investment expenditure, revenue or corporate profit. In economic and statistical terms, gross value added is generally calculated as the difference between output and intermediate consumption. Higher wages, research and development activities, and the involvement of domestic suppliers may be associated with greater economic value added or serve as relevant investment incentive criteria, but they do not automatically replace the direct measurement of value added.
It is not yet known which indicators Hungarian policymakers intend to use to assess companies’ economic contributions. Possible criteria could include productivity, domestic research and development activities, the creation of highly skilled jobs or integration into local supply chains. However, none of these should currently be regarded as officially announced eligibility requirements under the future Hungarian system.
International experience is particularly relevant when considering the expected changes to the development tax allowance in 2027, as it demonstrates that encouraging higher value added does not necessarily require reliance on a single financial indicator. Some countries establish predefined qualitative requirements, while others use scoring systems or evaluate the technological sophistication and employment impact of an investment.
The Current Hungarian Development Tax Allowance: Investment Thresholds, Eligibility and Tax Savings
In Hungary, the development tax allowance is one of the key instruments used to encourage investment by large enterprises. The scheme allows eligible companies to deduct a tax allowance determined under the applicable legislation from their corporate income tax liability in connection with qualifying investments.
Depending on the location and legal basis of the investment, the minimum investment thresholds applicable to large enterprises may range approximately from EUR 0.3 million to EUR 7.5 million. The allowance can be claimed for up to 13 tax years and may reduce the corporate income tax payable in a given year by up to 80%, subject to the applicable state aid limits.
In light of the expected changes to the development tax allowance in 2027, a particularly important question for large enterprises is whether the existing investment thresholds and rules governing the use of the allowance will remain unchanged or be supplemented by new requirements linked to economic value added.
International Comparison: Where Does the Value Added by Investments Matter?
The countries examined use different approaches to encourage large-scale corporate investments. In some jurisdictions, investment expenditure and job creation are the primary considerations. Elsewhere, technological sophistication, research and development, wage levels or sustainability criteria also directly influence eligibility for investment incentives.
From the perspective of Hungary’s proposed reforms, the key question is what economic performance companies may be expected to deliver in return for receiving tax benefits. To better understand the expected changes to the development tax allowance in 2027, it is useful to examine international models that already take the qualitative characteristics of investments into account.
| Country | General Corporate Income Tax Rate | Investment Tax Incentive | Value-Added-Related Criteria |
|---|---|---|---|
| Hungary | 9% | Development tax allowance for up to 13 years | Details of the proposed value-added-based reform are not yet known |
| Czech Republic | 21% | Corporate income tax relief for up to 10 years | Higher wages, R&D, university-educated employees, advanced technology |
| Poland | 19% | Investment-related tax exemption under the Polish Investment Zone | Qualitative scoring: R&D, automation, suppliers, employment, sustainability |
| Slovakia | 10%, 21% or 24%, depending on the tax base | Investment tax relief for up to 10 years | Growth in production or revenue, introduction of new technology |
| Croatia | 18%; 10% for certain smaller enterprises | Corporate income tax reductions for up to 10 years | – |
| Slovenia | 22% during 2024–2028 | Investment-related tax base deduction | – |
| Serbia | 15% | Tax exemption for large-scale investments | – |
| Romania | 16% | Investment tax allowance | – |
Czech Republic: Higher Wages, Research and Development, and Technological Sophistication
The Czech investment incentive system provides a particularly relevant example for Hungary’s proposed reforms, as qualitative requirements indicating higher value added are explicitly incorporated into the eligibility criteria for investment incentives available to large enterprises.
At the investment location, the average wage of all employees of the company must exceed the average wage in the relevant region. In addition, at least one of the following three conditions must be met:
a) At least 10% of employees hold a university degree, and the company cooperates with a research and development organisation in an amount equivalent to at least 2% of the eligible investment costs; or
b) At least 3% of employees are engaged in research and development activities; or
c) At least 10% of eligible investment costs are allocated to the acquisition of machinery and equipment intended for research and development.
The economic policy message behind the Czech approach is clear: an investment should do more than simply create additional production capacity. The incentive system also encourages companies to establish higher-skilled positions, introduce knowledge-intensive activities and contribute to technological advancement within the country.
This is one of the most important international examples when assessing the expected changes to the development tax allowance in 2027. Under a similar framework, large enterprises would need to consider the impact of their investments on wages, employee qualifications and research and development activities from the earliest stages of project planning.
Poland: Qualitative Scoring Behind Investment Tax Incentives
Poland’s Polish Investment Zone (PSI) system is another particularly relevant example for large enterprises operating in Hungary. In Poland, eligibility for investment-related tax exemptions is linked not only to the financial value of an investment but also to qualitative requirements covering both economic and social considerations.
The qualitative criteria related to sustainable economic development include supporting industries aligned with national development policy priorities, conducting research and development activities, introducing robotics and automation into processes associated with the investment, investing in renewable energy sources, and establishing cooperation with regional suppliers and business partners.
The criteria related to sustainable social development include creating jobs requiring specialised skills or offering competitive wages, ensuring stable employment, supporting employees’ professional development, cooperating with vocational education institutions and improving employee well-being. Additional assessment criteria include conducting economic activities with a low environmental impact and implementing investments in socioeconomically disadvantaged areas.
A distinctive feature of the Polish model is that tax incentives are not linked to a single value-added indicator. Instead, investments are evaluated against several predefined qualitative criteria. The specific requirements may vary depending on the nature and location of the investment and the applicable regulations.
This approach offers greater flexibility but requires an individual assessment of whether a particular investment qualifies for the tax incentive.
One of the main lessons of the Polish system, particularly in the context of the expected changes to the development tax allowance in 2027, is that governments can use tax incentives to prioritise specific types of economic activity. These may include investments involving more advanced technologies, stronger integration with domestic suppliers or increased demand for highly skilled employees.
If Hungary were to introduce a similar qualitative scoring system, investors could face additional requirements. Alongside evaluating the financial return on a project, companies might also need to make commitments regarding its economic and social impact.
Slovakia: Linking Technological Development to Measurable Business Growth
Slovakia represents a third, distinct approach. According to the comparative data examined, eligibility conditions for industrial investment incentives take into account not only the location and value of the investment but also technological modernisation and increases in production or revenue.
For expansion projects, a minimum 15% increase in production volume or revenue is required. Depending on the region, the minimum proportion of new technology must range between 30% and 60%.
This model primarily examines whether a supported investment genuinely generates additional production output and technological progress. The incentive is therefore linked not only to investment expenditure but also to measurable changes in the company’s operations.
An advantage of this approach is that production growth and technological modernisation can generally be documented using company-level data. However, an increase in revenue or production volume does not, in itself, demonstrate a corresponding increase in value added.
In relation to the expected changes to the development tax allowance in 2027, a key regulatory question will therefore be whether the Hungarian government intends to encourage additional production output, improvements in productivity or an actual increase in domestic value added resulting from the investment.
What Should Large Enterprises Operating in Hungary Consider?
International examples highlight three areas that could become relevant to the future reform of Hungary’s development tax allowance: encouraging knowledge-intensive activities, strengthening domestic economic relationships and improving the measurable performance of investments.
Given the expected changes to the development tax allowance in 2027, large enterprises operating in Hungary should already consider whether to pursue the allowance under the current conditions in 2026 or wait until the final regulations are published and plan their investments accordingly.
Is your company planning a major investment in Hungary? Our experts can help you review the current eligibility requirements for the development tax allowance, identify potential tax benefits associated with your investment, and assess the strategic implications of international investment incentive trends for your business.
