The European Commission has approved a HUF 47.5 billion (around €161 million) Hungarian aid scheme aimed at supporting the tourism and hospitality sectors that were hit hardest by coronavirus lockdown measures.
In a December 10 release, the commission announced that the Hungarian aid package, which supports the catering, culture, sports, and accommodation sectors through a combination of grants and tax relief, meets the conditions for state aid set out in the state aid temporary framework.
“The scheme aims at alleviating the employer’s costs and avoiding lay-offs,” the commission release states. “It also aims at mitigating the liquidity shortages that the beneficiaries are facing and ensuring the continuity of their economic activity during and after the outbreak.”
The aid scheme supports three of the four sectors — catering, culture, and sports — through exemptions from employer fiscal obligations totaling a maximum of 20.75 percent or 15.75 percent of the employees’ monthly gross salary (depending on the company’s tax regime). It also provides direct grants of up to 50 percent of the employees’ gross salary.
Under the scheme, aid to these three sectors will not exceed 80 percent of employees’ monthly gross salary and will last for up to 12 months.
Public support for the accommodation sector, including hotels and related businesses, consists of support for uncovered fixed costs or limited aid if companies are not eligible for compensation for uncovered fixed costs, according to the release.
The Hungarian government will calculate how much a beneficiary should receive in uncovered fixed cost compensation based on forecasted losses. These losses will be supervised through an ex post control of realized losses based on audited accounts or tax accounts for 2020, the release says. For accommodation sector businesses, the aid will not cover more than 70 percent of uncovered fixed costs, except for micro- and small enterprises, which may have up to 90 percent of uncovered fixed costs subsidized.
Over the last year, Hungary has issued about HUF 4 trillion ($13.5 billion) in tax relief for individuals and for employers in sectors disproportionately affected by the crisis, including tourism and hospitality. A host of new and extended tax relief measures announced in December are expected to save businesses another HUF 400 billion in taxes this year, according to Izer Norbert, secretary of state for taxation at the Ministry of Finance.
But Hungary has also taken controversial top-down measures in response to the coronavirus, such as restricting local governments’ taxing power to preserve tax breaks and other favorable tax regimes for businesses.
Hungary, along with fellow Visegrad country Poland, recently lifted its veto of an EU €750 billion coronavirus stimulus package in exchange for a delay in the sanctions process that could strip it of access to the funding. Hungary and Poland had opposed the package for its conditional linkage of funding with rule-of-law standards, under which both countries are being investigated for alleged violations.