The R&D tax credit changes in 2027 could introduce significant amendments for companies engaged in research and development activities in Hungary. Under the legislative proposal submitted on 27 October 2026, the general R&D tax credit rate would increase from 10% to 20%, the five-year binding election period would be abolished, and the application of corporate income tax incentives related to R&D activities would become more flexible.
However, these favourable changes would not necessarily affect all companies equally. The key considerations are when an R&D project was initiated and which tax incentive the company previously elected. These factors may determine whether the new, more favourable rules can actually be applied.
Current R&D Tax Credit Regulations in Hungary
Under Section 22/G of Act LXXXI of 1996 on Corporate Income Tax and Dividend Tax (CIT Act), companies have been entitled to claim an R&D tax credit for their own basic research, applied research and experimental development activities since 1 January 2024.
The general R&D tax credit rate is currently 10% of eligible R&D costs. A higher credit may be available for R&D activities carried out jointly with certain research institutions and higher education institutions, subject to a maximum tax credit of HUF 500 million per R&D project.
The tax credit can be claimed on a project-by-project basis in the tax year in which the eligible costs are incurred and in the following three tax years, potentially up to the full amount of the calculated corporate income tax liability. Any unused credit remaining after this four-year period may be refunded in cash, subject to certain conditions.
Under the current rules, companies must choose between the R&D tax credit and the R&D tax base deduction. This election is binding for five consecutive tax years and applies to all eligible R&D costs incurred during that period, rather than to individual projects.
R&D Tax Credit Changes in 2027: What Are the Key Amendments?
The legislative proposal introduces four significant changes:
- 20% R&D tax credit: The general tax credit rate would increase from the current 10% to 20%.
- Abolition of the five-year binding election period: Under the new rules, companies would no longer be required to commit to the R&D tax credit for five consecutive tax years.
- Greater flexibility in applying R&D tax incentives: Both the R&D tax credit and the R&D tax base deduction could be applied within the same tax year. However, only one incentive could be claimed for the same eligible cost.
- Stricter conditions for outsourced R&D services: Costs related to purchased R&D services would only qualify if the services were obtained from a specified category of providers. New declaration requirements would also apply to service providers.
The four-year period for claiming the R&D tax credit on a project-by-project basis would remain unchanged.
What Would the 20% R&D Tax Credit Mean in Practice?
For a qualifying R&D project initiated in 2027, eligible costs of HUF 100 million could generate an R&D tax credit of up to HUF 20 million, compared to HUF 10 million under the current rules, provided that all statutory conditions are met.
The increased credit could therefore provide substantial financial benefits, but only for projects falling within the scope of the new rules. It would not apply to projects already underway.
How Would the 2027 Changes Affect Ongoing R&D Projects?
Under the proposed transitional provisions, the 20% R&D tax credit would not apply to projects initiated before 2027.
The new provisions would first apply in the 2027 tax year to R&D projects initiated after 31 December 2026 and to eligible costs incurred after that date.
Accordingly, the start date of each project would be a determining factor:
| R&D project | Expected tax treatment |
|---|---|
| Project initiated in 2025 and continuing until 2028 | Generally, the existing 10% tax credit would continue to apply |
| Project initiated in 2026 and continuing in 2027 | Generally, the existing 10% tax credit would continue to apply |
| New project initiated in 2027 | 20% tax credit, subject to meeting the applicable conditions |
| Project initiated in 2027 by a company with an existing five-year election | Further legal interpretation required due to the transitional provisions |
Practical example: If a company initiated an R&D project in 2025 that continues until 2028, the 20% tax credit would not automatically apply to costs incurred in 2027 and 2028. Under the proposal, the relevant factor is the project’s start date, not merely the year in which the costs are incurred.
Practical implication: Companies should distinguish between R&D projects initiated before 2027 and those starting in 2027 or later. The increased tax credit rate should only be factored into financial planning for projects that meet the relevant eligibility and timing requirements.
What Happens to Previous Five-Year R&D Tax Credit Elections?
One of the most significant unresolved issues in the legislative proposal concerns the treatment of existing five-year elections.
Consider a company that elected the R&D tax credit in 2025 for the 2025–2029 period. Under the current legislation, this decision applies to all eligible R&D costs incurred during those five years.
If the company launches a new R&D project in 2027, it becomes unclear whether the previous election would remain binding or whether the amended rules could already be applied to the new project.
Based on the currently available transitional provisions, it is unclear whether the previous five-year election would remain fully effective, whether the 20% tax credit could be applied to a new project initiated in 2027, or whether the company could simultaneously apply the R&D tax credit and the R&D tax base deduction.
This uncertainty arises because the existing five-year election applies to all relevant eligible R&D costs of the taxpayer, whereas the proposed new rules link their applicability to the start date of individual projects.
Practical implication: Companies that elected the R&D tax credit in 2025 or 2026 should carefully assess the potential implications of their previous decisions. They should not assume that the five-year binding period will automatically cease to apply from 2027. Clarification will require an examination of the final transitional provisions.
How Should Companies Prepare for 2027?
In light of the R&D tax credit changes in 2027, companies engaged in research and development should review their ongoing and planned projects.
The first priority is to identify the start dates of individual projects and their eligible costs. This will help distinguish projects likely to remain subject to the previous rules from those potentially eligible for the new 20% tax credit.
Companies with existing five-year elections should also review their previous tax decisions. In addition, documentation relating to outsourced R&D services and the eligibility of service providers should be examined, as services purchased from large enterprises would no longer qualify for the tax credit under the proposed new rules.
The most important practical task is therefore to calculate the potential tax savings by considering the available combinations of incentives, while determining which rules would actually apply to each individual project.
Conclusion: Favourable Changes but Important Transitional Uncertainties
The R&D tax credit changes in 2027 could create significant opportunities for companies carrying out research and development activities in Hungary. The increased 20% tax credit rate and the abolition of the five-year binding election period would provide more favourable and flexible tax incentive opportunities.
However, two factors are particularly important in practice: the start date of the R&D project and the company’s previous tax credit election.
Projects initiated before 2027 would generally remain subject to the previous tax credit rate. For new projects starting in 2027 or later, clarification may be required regarding the interaction between existing five-year elections and the new rules.
It is therefore essential that the final legislation clarify the transitional provisions so that companies can claim R&D tax incentives in a clear, predictable and legally certain manner.
Important: This article is based on the information provided regarding the legislative proposal submitted on 27 October 2026. The final content of the new rules will be determined by the legislation as adopted and officially promulgated.
