Corporate - Deductions

Last reviewed - 24 January 2024

In general, costs and expenses incurred in relation to the taxpayer’s income-generating business activity are deductible for CIT purposes.

Accrued expenses are recognised for taxation purposes in the tax year they affect.

Depreciation and amortisation

Accounting depreciation that is accounted as expenditure, and thus included in the accounting profit, should be added back to the CIT base. Tax depreciation calculated according to the CDTA reduces the tax base, even if the tax depreciation is higher than the accounting depreciation. The tax depreciation of tangible assets should be calculated using the straight-line method on the basis of the historical value from the time when the asset was first used for business purposes.

Examples of tax depreciation rates include the following:

Assets Depreciation rate (%)
Computers and other high-tech machinery 33
Vehicles 20
Other tangible assets 14.5
Buildings (long-life structure) 2
Rented buildings 5

Assets newly acquired since 2003 can be depreciated at 50% annually; these instruments include, among other items, certain machinery and certain IP.

Generally, there is no prescribed amortisation rate for intangibles; the historical value, the residual value, and the useful life should be considered. However, goodwill can be amortised at an annual rate of 10%, provided that the business of the taxable person is in line with its intended purpose and that amortisation of goodwill can also be recognised for accounting purposes. Additionally, extraordinary amortisation might also be recognised for CIT purposes.

In the case of transformations, specific amortisation rules apply.

Organisational and start-up expenses

Companies are not obligated to capitalise the costs of formation/reorganisation. The capitalisation of these costs is at the company’s discretion, but the company should comply with its accounting policy. Furthermore, only the direct costs of formation/reorganisation that are not classified as investments or renovations and are likely to be recovered ultimately can be capitalised.

Interest expenses

Interest expenses are generally deductible if the following conditions are met:

  • Interest incurs in relation to the company’s profit generating activity.
  • Thin capitalisation / interest limitation rules are fulfilled (see This capitalisation / interest limitation rule in the Group taxation section).
  • Interest is in line with the transfer pricing principles (in a related-party setting).

Bad debt

Under the Act on CIT, bad debts are only deductible for CIT purposes if they are, for example, supported by legally valid third-party documents stating that the receivable cannot be collected. Expenses related to claims that cannot be enforced in court and expired claims are not deductible for CIT purposes.

In addition to the above, 20% of eligible bad debts are deductible from the CIT base if the debt was not settled within 365 days from the due date, provided that proper documentation is available.

Charitable contributions

Grants made or assets that are transferred without consideration, as well as liabilities assumed or services provided free of charge, will qualify as business expenses if the taxpayer has a declaration from the recipient stating that the recipient accounted the benefit/gift as an income hitting the P&L and its pre-tax profit and its tax base will not be negative without the income received in this regard and the corresponding CIT will be paid on the income. Special rules applies to grants provided to charity organisations and organisations performing no business activity.

Grants will always qualify as non-business expenses if they are provided to a foreign person or foreign resident company.

Tax base allowance regarding R&D

A tax base allowance is only applicable for R&D activities if the taxpayer carries out basic research, applied research, or experimental research activities within its own scope of activities.

The direct cost of the R&D activity or the amount of depreciation on the research activity (if the cost of R&D activity is capitalised) is deductible when calculating the pre-tax profit. Additionally, an extra deduction is granted from the tax bases in the form of a downward tax base adjustment.

300% of the direct costs of research activity (up to a maximum of HUF 50 million) are deductible from the tax base if the research activity is carried out jointly with a higher education institution, the Hungarian Academy of Sciences, or a research institute established by them.

The same deductibility rule is applicable if a cooperation agreement is concluded with a research institution operating either as a central budgetary organ or as a majority state-owned business organisation.

Taxpayers may also deduct from their CIT base the direct costs of R&D activity carried out with own assets and employees of their related parties if, based on the choice and the declaration of the related party, the deduction was not utilised by the related parties and the R&D also serves the business of the taxpayer who utilises the deduction.

In addition to the R&D tax base allowance available so far, by introducing the global minimum tax a new R&D tax credit entered into force, which is proposed to be a recognised as a refundable tax credit. Companies will have a choice between the two types of R&D incentives.

The new R&D tax credit is introduced with certain restrictions compared to the current R&D tax base allowance. The legislator narrows down the range of eligible costs and excludes certain direct costs related to R&D services performed as subcontractors.

It is important to note that the old tax base reduction and the newly introduced tax credit cannot be applied at the same time. If the company opts to apply the newly introduced tax credit, it cannot take into account the tax base reduction item in respect of R&D activities not only in CIT but also in LBT and social contribution tax.

Employee benefit expenses

Employee benefits and the fringe benefit tax payable on them are tax-deductible.

From 2017, the CIT base may be reduced, up to the amount of the pre-tax profit ('super deduction'), by the acquisition cost, additional acquisition cost, and by the renovation cost of accommodation facilities for workers, as defined by the Act on Personal Income Tax. The CIT base may also be reduced in a given tax year by the rental fee of property rented for the purpose of providing accommodation facilities for workers and by the operational costs of such facilities.

Bribes, ‘kickbacks’, other illegal payments

Bribes, ‘kickbacks’, and illegal payments are not recognised as business costs for CIT purposes and are non-deductible from the tax base. Legal consequences may arise as well.

Fines and penalties

Fines and penalties are not deductible for CIT purposes.


Taxes are usually deductible for CIT purposes, except for CIT, recoverable VAT, and the income tax of energy suppliers and public utility service providers.

Net operating losses

Losses can be carried forward according to the following:

Year the tax loss was generated Period of utilisation
Prior to the tax year starting in 2015 Without time limitation
From the tax years starting in 2015 and onwards During the following five tax years

Losses carried forward may only be used to offset up to 50% of the tax base calculated without losses carried forward. In the case of acquisition or legal transformation, special additional limitation rules apply.

Note that earlier tax losses must be used first (FIFO principle), and the losses of predecessors are also deductible from the successor company’s CIT base if certain additional conditions are met.

Losses cannot be carried back (except for agricultural companies, who may account for deferred losses by self-revision or by correcting the amount of tax paid in the previous two tax years).

Certain special rules apply to tax loss utilisation by the tax group and by the group members themselves (e.g. losses generated before the establishment of the tax group cannot be utilised by the tax group; they could only be utilised by the individual tax group members).

Payments to foreign affiliates

There is no general restriction on the deductibility of a consideration due to a foreign entity, provided the payment is a justifiable business cost. General anti-avoidance provisions (abuse of law, substance-over-form) may also result in non-deductibility. If the parties are considered to be related parties under the definition of the CDTA, the Hungarian tax office is entitled to adjust the Hungarian party’s tax base to reflect the market price (arm's-length price) if the parties did not make the adjustment themselves.

Considerations due for services are only deductible if the actual performance of the services is supported and the Hungarian taxpayer can prove that it benefits from the service.

The consideration paid to a CFC is not deductible for CIT purposes unless the taxpayer is able to prove and keeps documentation that it serves the purposes of business operations. For further details on the CFC rules, see the Group taxation section.