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How can your company get a 30-50% tax credit?
Interested in energy investment, modernisation? Does your company pay corporation tax? If so, read on!
The TAO law regulates in detail the extent of TAO obligations by type of organisation and by tax-increasing/decreasing items. Companies can either pay the TAO amount to the State Tax and Customs Administration or spend up to 70% or 80% of the total TAO amount – in the form of tax relief – on energy efficiency investments from 1 January 2017. The tax relief can be claimed in the form of tax retention.
Who can benefit from the TAO tax credit for energy investments?
Act LXXXI of 1996 on Corporate Tax and Dividend Tax (hereinafter referred to as the TAO Act) states that any organisation (e.g. business organisation, cooperative, public company, foundation, association, higher education institution, water association, etc.) that carries out entrepreneurial activities aimed at generating income and wealth is subject to TAO.
As such, all energy efficiency investments are eligible for corporate tax relief, although there are exceptions, which we will discuss in detail in a later article.
Rate of TAO tax relief
The amount of the tax credit that a taxpayer can claim cannot exceed the eligible costs of the investment per investment, together with the total amount of state aid claimed for the investment, in present value, as follows:
- 30 % for large companies,
- 40 % for medium-sized enterprises,
- 50 % for small and micro enterprises.
In each case, it should be noted that the maximum amount of tax relief is HUF 15 million.
Conditions for claiming the TAO tax credit
1. One of the important conditions is that the taxpayer must have an Energy Efficiency Investment Quality Certificate issued by an accredited energy auditor registered with the MEKH. This confirms that your investment qualifies as an investment for energy efficiency purposes.
2. It is important, however, that the investment must result in energy savings that reduce measured or estimated consumption compared to pre-investment levels.
This can be demonstrated by carrying out an energy audit.
The role of the energy audit in the eligibility for the TAO benefit
Two types of energy assessment required to qualify for the tax credit
1. Pre-investment energy audit:
– The energy auditing organisation assesses the energy consumption data for the technical system concerned by the planned investment, using measured data, and, if necessary, by calculating or estimating based on measured data, and estimates the energy savings that can be achieved by the planned investment, before the day on which the investment is to begin.
– The results of the preliminary assessment shall be communicated to the taxpayer in writing.
– The information shall include the methodology for determining the energy savings that can be achieved by the investment.
2. Preparation of a post-investment energy audit:
– The energy auditing entity shall prepare and deliver to the taxpayer an energy audit of the technical system affected by the investment after the investment has been put into service, including an energy assessment of the baseline condition and the energy savings achieved by putting the investment into service, calculated or estimated on the basis of measured or individual measurement data after the investment has been put into service.
Which energy investments are eligible for the TAO tax credit?
The legislation states the following (§ 4 b) of Government Decree 176/2017 (VII.4.):
- The investment cost of any energy generating equipment capable of producing electricity from renewable energy sources within the meaning of the Electricity Act is not eligible for the tax credit;
- However, the cost of equipment for the production of energy from renewable energy sources for own use for heating, cooling and industrial heating purposes, which is not capable of producing electricity and is used for own activity (in particular, equipment for the production of electricity by means of probe, groundwater, air-to-air heat pumps, gas heat pumps, solar collectors, equipment for the production of biogas and biomass from own waste);
- a tax credit for an investment or part of an investment in the use of energy from renewable energy sources, if the investment or part of an investment leads to an increase in energy efficiency.
In principle, therefore, it can be said to apply to almost everything other than electricity production that is under consideration (including electricity production, if used.)
Accountability is also retroactive: the implementing decree related to the TAO Act – which entered into force on 05.07.2017 – states that for investments started before the entry into force (but after 01.01.2017), an energy audit before the investment is not required, it is sufficient to prepare an energy audit after the investment.
The period to benefit from the tax credit is 6 years. It can be claimed in the year of commissioning or in the year after commissioning and in the 5 tax years thereafter.
Our company has a research and development cooperation with the Department of Meteorology of the Faculty of Natural Sciences of the University of Debrecen.
The research includes the optimization of the installation, the measurement of the performance of the instruments and the identification of possible technical improvements.
We intend to apply for several EU and national R&D grants, involving other universities, possibly abroad, in our work.
Hybrid wind turbines will be supplied with proprietary control systems. These will provide the highest yield. The system has self-diagnostic functions to monitor and alert the owner and the manufacturer in case of failure. The controls and their components are guaranteed for 5 years, can be monitored online and their software can be updated remotely.