This article is the fourth in a seven-part series that introduces the important rules of corporate taxation in Hungary. The series will later cover topics such as cross-border treatment, anti-avoidance, and penalties for non-compliance.
Investment in tangible assets is subject to the following tax procedure:
- SME investment allowance:
Micro- and SMEs may reduce their pre-tax profit under the following conditions:
- the investment value of intangible assets not yet used in the scope of operations,
- the investment value of tangible assets not yet put into use, which are considered technical equipment, machinery, vehicles directly serving the activity,
- the value of renovation, expansion, change of purpose, transformation for the tax year that increases the cost value of the property,
- the cost value of the right to use of new intellectual property and software products registered in the tax year among intangible assets,
- the value of investment and renovation carried out and capitalized by the tenant on the rented property.
2. Investment in R&D activities
According to Hungarian tax law, companies that make significant investments in certain research and development (R&D) activities can benefit from a development tax credit of up to 80 percent.
3. Inventories
There are no special tax or valuation rules for inventories, however, inventories are generally valued at the lower of their acquisition/production cost and market value for both fiscal and accounting purposes. To determine the acquisition/production cost, the taxpayer can choose from three inventory valuation methods: FIFO (First In, First Out), LIFO (Last In, First Out) and WAC (Weighted Average Cost).
4. Derivative financial instruments
There is no special taxation system for derivatives. Financial gains and/or losses arising from the year-end valuation of derivative financial instruments at their fair market value, in accordance with generally accepted accounting principles and International Accounting Standards/International Financial Reporting Standards, are generally recognized for corporate tax purposes.
This article provides a general introduction to Hungarian corporate tax regulations and should not be considered specific legal advice.