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6.5. Other Items

General Rule

Business expenses are generally deductible for corporate income tax purposes. However, expenses for certain fringe benefits and for the personal use of assets must be added to the pre-tax profit.

Non-business Related Costs and Expenditure

Non-business related costs and expenditures are non-deductible from the tax base. Among others, these are:

  • The costs of scrapped assets if the demolition cannot be supported by documents;
  • The net cost of services exceeding HUF 200,000 (approx. EUR 650), if the services are not in accordance with the requirement of the “reasonable business needs” of the company;
  • Costs and expenditures increased in relation to controlled foreign corporations, unless there is proof substantiating the payments’ connection with the business activity;
  • The book value of missing assets, if, with the proper care, the shortfall could have been avoided;
  • Generally free transfer of cash/asset, assumption of liability or provision of services without consideration are considered as non-business related transactions, thus, these costs are non-deductible. Exceptions are public benefit donations and donations to Hungarian individuals, or Hungarian companies that would not make a loss without such transfer; and
  • The direct cost of research and development if it is not related to the business activity of the taxpayer.


In general, when determining the corporate tax base, the dividend income is not taxable, i.e., the corporate tax base may be decreased by the amount of dividends. However, dividends received from controlled foreign corporations are non-deductible from the tax base unless, from 1 January 2021, the CFC conducts a genuine business.

Moreover, any type of income (such as dividends) could be reclassified as taxable, if it turns out that the payment/transaction resulted in double non-taxation. Hence the dividends received cannot be deducted from the tax base for corporate income tax purposes if the dividend is deductible to the distributing entity.


As a general rule, interest is considered as ordinary taxable income (with the exception of interest deduction rules).


Only 50% of the profit derived from qualifying IPs is subject to corporate income tax. Qualifying IPs are: software, patent, utility model, plant variety right and topographies of semiconductor products. The OECD “nexus rules” were also introduced in the Hungarian tax system (broadly speaking IP tax benefits may be enjoyed to the extent the IP is developed by the taxpayer).

The income exempted under this rule cannot exceed 50% of the pre-tax profits of the Hungarian taxpayer as shown in its Hungarian statutory financial statements. This means that through this mechanism, the effective corporate tax  rate can be reduced overall to 4.5% depending on the overall size of the corporate tax base (See Sec. 10.3.).

R&D Costs

Pre-tax profit can be decreased by the direct costs of R&D incurred within the taxpayer's own scope of activities during the tax year. If the company opts to capitalize its R&D costs (an option it has under Hungarian statutory accounting), the depreciation can be deducted from the tax base. Because R&D costs can be expensed or depreciated for statutory accounting purposes as well, these expenses are in effect deductible twice for corporate income tax purposes. Subject to certain conditions, it is also possible for companies to decrease their tax base by the direct costs of R&D incurred at their related party provided that the latter does not apply the related tax-decreasing item.

In the case of taxpayers carrying out their R&D activity on premises managed by a research institution founded by an institution of higher education, the Hungarian Academy of Sciences (including any equivalent organization established in any EU or EEA Member State), a central budgetary research institution or a research institution operating as state-owned business organization, the tax base can be decreased by 300% of the direct R&D costs incurred (instead of 100%), but the amount of this deduction is capped at HUF 50 million (approx. EUR 160,000).


The impairment of debts is basically only tax deductible if the debt cannot be collected (such as because of the bankruptcy of the debtor). However, each year 20% of the impairment of receivables overdue for more than a year is deductible for CIT purposes. Financial institutions are eligible to deduct the impairment of receivables deriving from their provisioning of financial or investment services.

The impairment accounted for on equity investments is deductible for corporate income tax purposes unless it relates to reported shares, to the shares of a CFC or the restoration of the subsidiary’s equity.