EC takes issue with Hungary's R&D tax

The European Commission has made a formal request to Hungary to change its tax law provisions which limit the granting of an incentive to taxpayers who engage in R&D activities performed on premises located in that country. The provisions are incompatible with the freedom to provide services as guaranteed by Article 49 of the EC Treaty and Article 36 of the European Economic Area Agreement.

The request takes the form of a reasoned opinion (second step of the infringement procedure provided for in Article 226 of the EC Treaty). If there is no satisfactory reaction to the reasoned opinion within two months, the Commission may decide to refer the matter to the European Court of Justice.

Under current Hungarian legislation, basic and applied research or experimental development services performed on premises that are managed by a research institution (research facility) founded by a Hungarian enterprise of higher education or the Hungarian Academy of Sciences are treated more favorably than are similar R&D activities performed on similar premises located in other European Union member states or EEA/European Free Trade Area countries.