Businesses in Hungary are also having to deal with steadily rising energy costs in the present economic environment, paying many times as much for gas and electricity than they did previously. Investing in energy efficiency is one approach to cutting expenses, and the Corporate Tax Act also connects this to a tax benefit.
Businesses that are sustainable endure
On the market, it is evident that sustainability is now a matter of corporate policy in addition to value systems. Sustainable businesses incorporate more efficient processes and methods, attempt to limit the use of materials required for their economic operation and production, and are aware of how much energy their buildings, production machines, other technical equipment, and cars use.
Advice on solar farms, electric car technology, and solar panel installation is highly sought after. The number of persons utilizing tax incentives for investments—usually modifications to lighting and HVAC systems—is steadily increasing.
Modifications to the Corporate Tax Act: Which investment tax allowances are eligible to be claimed and when?
In addition to the tax allowance for energy efficiency investments becoming a part of the corporation tax system since January 1, 2017, this year has seen legal amendments due to modifications made to the regional aid map. This indicates that the energy efficiency tax allowance’s aid intensity is thirty percent for large businesses in the Budapest region and forty-five percent for businesses in all other regions. For small and medium-sized businesses, the allowance can be enhanced by twenty and ten percentage points, respectively.
For the first time, energy-efficient repairs and expenditures made after December 31, 2021, may be subject to these modifications.
The definition of a firm in trouble has also been changed. As a result, a taxpayer that was not in difficulty on December 31, 2019, but became so between January 1, 2020, and December 31, 2021, is no longer considered to be in difficulty (and may therefore be eligible for a tax allowance).
Among the earlier modifications, it is crucial to emphasize that electric (hybrid) cars are not eligible for the tax exemption for energy efficiency expenditures, according to the Corporate Tax Act amendment that went into effect on December 27, 2020! Passenger cars with so-called “large load space” are an exception, though, and they are still eligible for tax savings of up to 70% of corporate tax.
Each investment may only receive a maximum tax allowance of EUR 15 million. Unlike the development tax allowance, there is no legal minimum investment value in this case, so renovations can also qualify for the tax allowance as long as they improve energy efficiency and are operated and used by the taxpayer for a minimum of five years following installation.
For the purpose of tax deduction, the investment must be accurately cost-classified
As this is also a major concern for the Tax Administration during an audit, special attention should be given to the accurate characterization of the scope of acceptable costs when claiming tax allowance. Each investment may only receive a maximum tax allowance of EUR 15 million. Unlike the development tax allowance, there is no legal minimum investment value in this case, so renovations can also qualify for the tax allowance as long as they improve energy efficiency and are operated and used by the taxpayer for a minimum of five years following installation.
Requirements for filing a tax allowance claim
It is not necessary to notify or apply in advance to receive the tax allowance. However, the company needs a certificate from an energy auditor, or an energy auditing agency registered in the Hungarian Energy and Public Utility Regulatory Office’s (MEKH) register before beginning any energy efficiency investments. This is required to prove that the money is being invested in energy efficiency. To take advantage of the tax allowance, you must have a certificate from an energy specialist.
Apart from the previously mentioned pre-audit, there is an additional component of the energy audit known as the post-audit that needs to be completed and recorded following the implementation of the investment.
It’s crucial to understand that the Corporate Tax Act requires a compliance audit, or tax audit, to be completed by the end of the third year following the tax allowance claim before obtaining these advantages! If questions emerge, it is preferable to speak with a trained tax expert in advance. Frequently, the audit finds that the relevant certificates, records, and related computations are insufficient, and the evidence needed for the claim is not entirely available.
Investments made in the utilization of energy from renewable energy sources are also eligible for the tax deduction for energy efficiency. It is crucial to remember, too, that expenditures made just to adhere to previously enacted EU regulations are not eligible for the tax reduction.
Comments are closed.