Strategic Large-Scale Investments and Individual Government Decision Grants (EKD) in Hungary 2026

Introduction

Hungary has long positioned itself as one of the most investment-friendly destinations in Central and Eastern Europe, leveraging a combination of competitive corporate tax rates, a skilled workforce, strategic geographic location, and an extensive system of investment incentives. At the heart of this system lies the Individual Government Decision (Egyedi Kormánydöntés, “EKD”) grant mechanism, coordinated by the Hungarian Investment Promotion Agency (Magyar Beruházásösztönzési Ügynökség, “HIPA”). The year 2026 marks a significant inflection point in Hungary’s investment incentive policy, with a pronounced shift toward R&D-intensive and green-economy projects, tighter monitoring of support contracts, and continued alignment with the EU state aid framework.

This article provides a detailed analysis of the EKD grant system as it stands in 2026, including eligibility criteria, procedural requirements, green sustainability commitments, and the interplay between Hungarian national incentives and EU state aid rules.

The HIPA System and Investment Promotion

Role of HIPA

HIPA serves as the Hungarian Government’s primary agency for attracting and facilitating foreign direct investment (FDI). Its mandate includes:

• Identifying and targeting potential investors in priority sectors;
• Providing a single point of contact for investors navigating the Hungarian regulatory landscape;
• Coordinating with relevant ministries, local governments, and regulatory authorities to expedite the investment process;
• Administering the EKD grant evaluation process and presenting investment proposals to the Government for decision.

HIPA does not itself make grant decisions—those are reserved to the Government acting by way of an individual government decision—but its role in evaluating proposals and formulating recommendations is decisive in practice.

Priority Sectors in 2026

In 2026, Hungary’s investment incentive strategy has shifted meaningfully in comparison to previous years. While the manufacturing sector—particularly the automotive, electronics, and food-processing industries—continues to attract significant investment, the Government has signalled a clear preference for projects in the following areas:

• Research and development (R&D) centres and activities, particularly those involving advanced manufacturing, artificial intelligence, biotechnology, and pharmaceutical innovation;
• Green economy investments, including renewable energy generation, battery cell manufacturing with sustainable supply chains, circular economy initiatives, and energy-efficient building technologies;
• Shared services and business process outsourcing (BPO) centres with a technology-intensive focus;
• Logistics and distribution hubs, capitalising on Hungary’s central European location and connectivity.

This shift reflects both domestic policy priorities and the constraints imposed by the evolving EU state aid framework, which increasingly channels regional aid toward higher-value-added activities.

Individual Government Decision (EKD) Grants

Overview

An EKD grant is a discretionary, non-refundable cash subsidy awarded by the Hungarian Government through an individual government decision (egyedi kormánydöntés). EKD grants are available for large-scale investment projects that meet the Government’s strategic priorities and satisfy a series of eligibility and conditionality criteria.

The defining features of EKD grants include:

• Discretionary nature: There is no automatic entitlement; the Government exercises its discretion in evaluating each proposal;
• Negotiated terms: The amount, conditions, and disbursement schedule of each grant are the product of negotiation between HIPA and the investor, subject to EU state aid limits;
• Support contract: The grant is formalised in a support contract (támogatási szerződés) between the Hungarian State and the investor, setting out detailed obligations, milestones, and reporting requirements;
• Post-investment monitoring: The investor’s compliance with the support contract is monitored for a period of five years (three years for SMEs) following the completion of the investment.

Eligibility Criteria

To be eligible for an EKD grant in 2026, an investment project must generally satisfy the following conditions:

1. Minimum investment threshold: The project must involve a minimum eligible capital expenditure of EUR 10 million (EUR 5 million for investments in economically disadvantaged regions designated under the regional aid map);
2. Job creation: The project must create a minimum number of new jobs, typically at least 50 full-time equivalent positions (25 for R&D projects);
3. Sectoral alignment: The project must fall within one of the Government’s designated priority sectors;
4. Incentive effect: The investor must demonstrate that the grant is necessary for the investment to proceed in Hungary—i.e., that the investment would not have been made, or would have been made elsewhere, without the support (the “incentive effect” requirement under EU state aid law);
5. Financial viability: The investor must demonstrate sufficient financial capacity to complete the project and maintain it for the required monitoring period.

Application Process

The EKD application process is typically initiated through HIPA and proceeds through the following stages:

1. Preliminary consultation: The investor (or its legal and financial advisers) engages HIPA for an initial assessment of the project’s eligibility and indicative support level;
2. Formal application: The investor submits a detailed business plan, financial projections, job creation commitments, and environmental and sustainability documentation;
3. HIPA evaluation: HIPA conducts a cost-benefit analysis and prepares a recommendation to the Government;
4. Government decision: The Government adopts an individual government decision approving the grant, setting out the key terms;
5. Support contract negotiation and execution: The Ministry of Foreign Affairs and Trade (Külgazdasági és Külügyminisztérium) and the investor negotiate and sign the support contract;
6. Disbursement: The grant is disbursed in tranches upon achievement of milestones specified in the support contract (e.g., commencement of construction, commencement of production, achievement of job creation targets).

Support Contract Monitoring: 2026 Developments

The monitoring of support contracts has been significantly strengthened in 2026. Key developments include:

• Annual compliance audits: Investors receiving EKD grants are now subject to annual on-site compliance audits conducted by HIPA in coordination with the Government Control Office (Kormányzati Ellenőrzési Hivatal, “KEHI”);
• Clawback triggers: The support contract must now specify detailed clawback triggers, including failure to maintain promised employment levels, failure to meet R&D spending commitments, and failure to comply with green sustainability requirements;
• Mid-term review: For investments exceeding EUR 50 million, a formal mid-term review is conducted three years after the grant decision, at which point the Government may adjust the terms of the support contract to reflect changed circumstances;
• Reporting obligations: Quarterly reporting to HIPA on investment expenditure, employment, and sustainability metrics is now mandatory for all EKD grant recipients.

Green Sustainability Requirements

New Obligations in 2026

Reflecting Hungary’s commitments under the European Green Deal and the National Energy and Climate Plan (Nemzeti Energia- és Klímaterv, “NEKT”), EKD grants awarded from 2026 onwards are subject to mandatory green sustainability requirements. These include:

• Carbon footprint reduction targets: The investor must commit to measurable carbon footprint reduction targets relative to a baseline established at the time of the investment, with annual reporting;
• Energy efficiency standards: New production facilities must meet or exceed the nearly zero-energy building (nZEB) standard prescribed by Government Decree 176/2008 (VI. 30.) on the energy performance of buildings;
• Waste management and circular economy commitments: The investor must adopt a waste management plan aligned with the EU waste hierarchy (prevention, re-use, recycling, recovery, disposal) and submit evidence of compliance with extended producer responsibility (EPR) obligations where applicable;
• Supply chain sustainability: For investments in manufacturing, the investor must demonstrate due diligence with respect to the environmental and social sustainability of its supply chain, in accordance with the principles of the EU Corporate Sustainability Due Diligence Directive (once applicable).

Failure to comply with green sustainability commitments may result in partial or full clawback of the grant, and non-compliant investors may be excluded from future EKD eligibility.

EU State Aid Framework Compliance

The Regional Aid Map

Hungary’s EKD grant system operates within the constraints of the EU regional aid framework, specifically the Guidelines on Regional State Aid (2021/C 153/01) and Hungary’s approved regional aid map for the period 2022–2027. The regional aid map defines the maximum permissible aid intensity for each region of Hungary, expressed as a percentage of eligible investment costs:

• Central Hungary (excluding Budapest): up to 30% for large enterprises (higher for SMEs);
• Western Transdanubia, Central Transdanubia: up to 30–40% depending on the specific county;
• Southern Transdanubia, Northern Hungary, Northern Great Plain, Southern Great Plain: up to 50% for large enterprises, reflecting the lower level of economic development.

Budapest is excluded from regional aid entirely for large enterprises, though limited aid may be available for SMEs and R&D projects under separate legal bases.

Notification and Exemption

EKD grants exceeding the notification thresholds set out in the General Block Exemption Regulation (GBER, Regulation (EU) No 651/2014) must be individually notified to the European Commission for approval. In practice, this means that very large grants (typically exceeding EUR 30–50 million depending on the region and aid intensity) undergo a Commission scrutiny process, which can add several months to the timeline.

For grants below the notification threshold, compliance with GBER is self-assessed by the Hungarian authorities. HIPA and the Ministry of Foreign Affairs and Trade maintain internal state aid expertise to ensure compliance, but investors are well advised to engage independent state aid counsel to verify that the proposed grant structure is compatible with EU law.

The Development Tax Credit (Tao. tv. 22/B. §)

In addition to direct EKD grants, investors in Hungary may benefit from the development tax credit (fejlesztési adókedvezmény), governed by Section 22/B of Act LXXXI of 1996 on Corporate Tax and Dividend Tax (a társasági adóról és az osztalékadóról szóló 1996. évi LXXXI. törvény, “Tao. tv.”). The development tax credit allows a qualifying investor to reduce its corporate income tax liability by up to 80% over a period of up to 13 tax years, subject to the regional aid intensity caps.

The development tax credit is an especially attractive tool because:

• It is available in addition to or in lieu of an EKD cash grant (though the combined aid intensity may not exceed the regional aid cap);
• It can be claimed for investments in tangible assets (land, buildings, machinery) and, since 2023, for certain intangible assets (patents, licences, know-how);
• The credit is available regardless of the investor’s nationality, provided the investment is made through a Hungarian-resident corporate entity.

In 2026, the Tao. tv. development tax credit interacts with the global minimum tax (Pillar Two) framework in a way that requires careful planning—see our separate article on this topic for details.

Practical Recommendations

Structuring the Investment

Investors contemplating a large-scale investment in Hungary should consider the following structuring points:

• Legal entity: The investment should generally be channelled through a Hungarian-resident limited liability company (korlátolt felelősségű társaság, “Kft.”) or private limited company (zártkörűen működő részvénytársaság, “Zrt.”) to maximise eligibility for incentives;
• Timing: The application for an EKD grant must be submitted before the commencement of the investment (the “incentive effect” requirement). Any expenditure incurred before the submission of the application is ineligible for support;
• Combined incentives: The interplay between EKD grants, the development tax credit, EU-funded grants (e.g., under the Recovery and Resilience Facility or Cohesion Policy programmes), and local government incentives (e.g., property tax exemptions) must be carefully orchestrated to remain within the permitted aid intensity;
• Transfer pricing: For multinational investors, the pricing of intra-group transactions must comply with Hungarian transfer pricing rules (Tao. tv. Sections 18 and 18/A) and the OECD Transfer Pricing Guidelines, as non-arm’s-length pricing can jeopardise both the investment incentive and the tax credit.

Engaging Legal and Financial Advisers

The complexity of the EKD process, the evolving regulatory environment, and the substantial financial stakes involved make early engagement of experienced legal and financial advisers essential. Key areas where professional advice is critical include state aid compliance, support contract negotiation, environmental and sustainability compliance, and post-investment monitoring.

Local Government Incentives

In addition to EKD grants and the development tax credit, investors may benefit from local government incentives offered by Hungarian municipalities and county-level authorities. These may include:

• Local business tax (helyi iparűzési adó) discounts or exemptions, which can be granted by the municipal government for a fixed period (typically up to 5 years) as an incentive for job-creating investments;
• Property tax exemptions on newly constructed industrial or commercial properties;
• Discounted purchase or lease of municipal land in industrial parks or special economic zones;
• Infrastructure development contributions, where the local government invests in road, utility, or other infrastructure improvements to support the investor’s project.

These local incentives are subject to EU state aid rules and must be included in the calculation of total aid intensity.

Labour Market Considerations

Investors should also be aware of Hungary’s evolving labour market dynamics in 2026. While Hungary offers a competitive wage environment relative to Western Europe, certain sectors—particularly manufacturing, logistics, and IT—face labour shortages that may affect project implementation timelines. The Government has responded with measures including:

• Guest worker programmes facilitated through bilateral agreements with selected non-EU countries;
• Vocational training subsidies for employers that invest in the skills development of their Hungarian workforce;
• University cooperation programmes linking investment projects with Hungarian technical universities to create talent pipelines.

Investors are advised to incorporate labour availability analysis into their project planning and to take advantage of available workforce development incentives.

Conclusion

Hungary’s investment incentive system, anchored by the EKD grant mechanism and the development tax credit, remains among the most generous in the EU. However, the 2026 landscape is characterised by increased complexity—stricter green sustainability requirements, tighter monitoring, and the interaction with new international tax rules demand a more sophisticated approach to investment planning. Investors who engage early with HIPA and secure competent legal advice will be best positioned to maximise the benefits of Hungary’s incentive framework while maintaining full compliance with EU and domestic requirements.

Dr. Ildikó Nagy advises domestic and international investors on investment incentives, corporate structuring, and regulatory compliance in Hungary. For a tailored consultation, please contact our office.