Corporate Tax in Hungary (Part 4): Investment in Capital Assets – 2025 Update

Corporate Tax in Hungary: This article is the fourth part of a comprehensive seven-part series on corporate taxation in Hungary. While earlier parts covered the general rules and tax benefits, this segment focuses on the tax treatment of investments in capital assets — a crucial area for businesses aiming to expand operations or optimize taxable income. Future articles in the series will address cross-border taxation, anti-avoidance provisions, and penalties for non-compliance.

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1. SME Investment Allowance (2025)

Small and medium-sized enterprises (SMEs) in Hungary are eligible for a corporate tax base reduction under certain capital investment conditions. The 2025 rules allow the tax base to be reduced by the value of:

Intangible assets not yet in use within the company’s operational activities;

Tangible assets (technical equipment, machinery, vehicles) that are not yet operational but serve the business activity directly;

Renovation, expansion, repurposing, or transformation of property, provided these increase the book value of the property;

Intellectual property rights and new software licenses acquired and recorded during the tax year;

Investments and renovations carried out and capitalized by the lessee on leased property.

This corporate tax incentive supports business growth, modernization, and technological renewal in the SME sector.

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2. Development Tax Credit for R\&D Investments

The law of Corporate Tax in Hungary continues to support research and development (R\&D) through a development tax credit, which in 2025 remains available at up to 80% of the annual corporate tax liability. Eligible companies must carry out substantial investment projects classified as R\&D activities under Hungarian or EU definitions.

To claim the tax credit, prior notification or approval from the Hungarian Tax Authority (NAV) may be required, especially in the case of large-scale projects or where state aid thresholds are met.

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3. Inventory Valuation

There are no specific tax benefits or incentives in Hungary for inventories, but tax law relies on accounting regulations for valuation. Inventories are valued at the lower of acquisition/production cost or market value, in accordance with the accounting principles.

For inventory costing, taxpayers may choose among three methods:

FIFO (First In, First Out),

LIFO (Last In, First Out),

WAC (Weighted Average Cost).

The selected method must be applied consistently and disclosed in the accounting policies of the company.

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4. Derivative Financial Instruments

The law of Corporate Tax in Hungary does not provide a separate tax regime for derivative financial instruments. Gains or losses resulting from year-end revaluation of derivatives at fair market value are included in the corporate tax base, in accordance with Hungarian accounting standards or IFRS, where applicable.

This treatment ensures alignment between the company’s accounting and tax positions regarding financial risk management tools such as options, forwards, swaps, and futures.

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Disclaimer

This article provides a general overview of corporate tax in Hungary as of 2025. It is not intended as legal or tax advice. For tailored solutions, please consult your legal or tax advisor.

Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)

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