This article is the fourth installment in our seven-part series on corporate taxation in Hungary, designed to provide a practical guide for companies and investors. In this part, we explore the Hungarian tax treatment of investments in capital assets, covering incentives for small and medium-sized enterprises (SMEs), research and development (R\&D) investments, inventory valuation, and derivative financial instruments. Future parts of the series will cover cross-border taxation, anti-tax avoidance measures, and penalties for non-compliance.
1. SME Investment Allowance (Kisvállalkozások Beruházási Kedvezménye – 2025)
In 2025, Hungarian tax law continues to support micro and small to medium-sized enterprises (SMEs) through an investment discount aimed at encouraging growth and technological development. Eligible SMEs may reduce their pre-tax profit by the value of qualifying investments, such as:
Intangible assets not yet in use (e.g. licenses, patents),
Tangible assets not yet in service, classified as machinery, technical equipment, or vehicles directly serving the business activity,
Renovation, expansion, transformation, or repurposing of property increasing the asset’s book value,
Acquisition costs of new intellectual property and software products recorded during the tax year,
Investments and improvements made and activated by the lessee on leased property.
This allowance aims to incentivize reinvestment and modernization across the SME sector.
2. Development Tax Incentive for R\&D Investments
Enterprises making substantial investments in eligible R\&D activities in Hungary may claim a development tax allowance. The tax credit may be as high as 80% of the calculated corporate income tax and can be used over several tax years, subject to conditions set by the Hungarian Tax Authority (NAV). These include minimum investment thresholds and registration requirements.
This incentive continues to be a cornerstone of Hungary’s innovation strategy and is aligned with EU state aid rules.
3. Inventory Valuation Rules in Hungary
In 2025, no specific tax benefits apply to inventories under the Hungarian Corporate Income Tax Act. However, businesses must evaluate inventories using the lower of acquisition/manufacturing cost or market value. The chosen inventory valuation method—FIFO (First In, First Out), LIFO (Last In, First Out) or WAC (Weighted Average Cost)—must be consistent and reflect the true financial position of the enterprise.
4. Derivative Financial Instruments
Hungarian corporate tax law does not introduce a separate regime for derivative financial instruments. Gains or losses from these instruments—measured using fair market value in accordance with International Financial Reporting Standards (IFRS)—are recognized for tax purposes as part of accounting income.
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Disclaimer: This article serves for general information purposes only and does not constitute specific legal or tax advice. For tailored advice, please contact our firm directly.
Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
___________________________________
Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-1106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobil: + 36 70 344 0388
Fax: +36 1 700 27 57
Corporate Tax in Hungary (Part 4): Investment in Capital Assets – 2025 Update
This article is the fourth installment in our seven-part series on corporate taxation in Hungary, designed to provide a practical guide for companies and investors. In this part, we explore the Hungarian tax treatment of investments in capital assets, covering incentives for small and medium-sized enterprises (SMEs), research and development (R\&D) investments, inventory valuation, and derivative financial instruments. Future parts of the series will cover cross-border taxation, anti-tax avoidance measures, and penalties for non-compliance.
1. SME Investment Allowance (Kisvállalkozások Beruházási Kedvezménye – 2025)
In 2025, Hungarian tax law continues to support micro and small to medium-sized enterprises (SMEs) through an investment discount aimed at encouraging growth and technological development. Eligible SMEs may reduce their pre-tax profit by the value of qualifying investments, such as:
Intangible assets not yet in use (e.g. licenses, patents),
Tangible assets not yet in service, classified as machinery, technical equipment, or vehicles directly serving the business activity,
Renovation, expansion, transformation, or repurposing of property increasing the asset’s book value,
Acquisition costs of new intellectual property and software products recorded during the tax year,
Investments and improvements made and activated by the lessee on leased property.
This allowance aims to incentivize reinvestment and modernization across the SME sector.
2. Development Tax Incentive for R\&D Investments
Enterprises making substantial investments in eligible R\&D activities in Hungary may claim a development tax allowance. The tax credit may be as high as 80% of the calculated corporate income tax and can be used over several tax years, subject to conditions set by the Hungarian Tax Authority (NAV). These include minimum investment thresholds and registration requirements.
This incentive continues to be a cornerstone of Hungary’s innovation strategy and is aligned with EU state aid rules.
3. Inventory Valuation Rules in Hungary
In 2025, no specific tax benefits apply to inventories under the Hungarian Corporate Income Tax Act. However, businesses must evaluate inventories using the lower of acquisition/manufacturing cost or market value. The chosen inventory valuation method—FIFO (First In, First Out), LIFO (Last In, First Out) or WAC (Weighted Average Cost)—must be consistent and reflect the true financial position of the enterprise.
4. Derivative Financial Instruments
Hungarian corporate tax law does not introduce a separate regime for derivative financial instruments. Gains or losses from these instruments—measured using fair market value in accordance with International Financial Reporting Standards (IFRS)—are recognized for tax purposes as part of accounting income.
—
Disclaimer: This article serves for general information purposes only and does not constitute specific legal or tax advice. For tailored advice, please contact our firm directly.
Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
___________________________________
Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-1106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobil: + 36 70 344 0388
Fax: +36 1 700 27 57