NEW RULES ON THE VIP PACKAGE How can the VIP package coexist with the EU co-financed scheme?

1. NEW RULES ON THE VIP PACKAGE How can the VIP package coexist with the EU co-financed scheme? Kamilla Szandrocha Head of Department for Incentive Programs

2. Incentive system for strategic investors • Coexistence of individual cash grant and EU tenders • Changes in regulation in 2007 • The Investment and Trade Development Agency of Hungary (ITDH): one-stop-shop also in subsidies

3. Incentive system for strategic investors I. Direct incentives Development cash grants • Individual cash grant OR • Subsidies co-financed by the European Union available by tenders Employment-related grants • Job-creation subsidy • Training subsidy II. Indirect incentive • Development tax allowance

4. Coexistence of individual cash grant and EU tenders I. • Differences between individual cash grant and • EU tenders Individual cash grant is available • only for large investments (investment volume at least EUR 10 million, minimum job-creation of 25-50 employees) • for investments located anywhere in the country • through the whole year Tender applications are available • for all size of investments • in Central Hungary tenders are available only for SMEs • only through some months of the year

5. Coexistence of individual cash grant and EU tenders II. • The coexistence In case of investment volume between EUR 10 and 25 million if the project is entitled for subsidies available within tenders, it cannot receive individual cash grant. • Reasons: budgetary and regulatory • Implementation: ITDH is checking all the applications of investments between EUR 10 and 25 million with the National Development Agency

6. Changes in Regulation I. Maximum intensity ratios in 2007 Automotive industry belongs no more to sensitive sectors! Borsod-Abaúj-Zemplén Szabolcs-Szatmár-Bereg Nógrád Heves Komárom-Esztergom Győr-Moson-Sopron Budapest Hajdú-Bihar Jász-Nagykun-Szolnok Pest Vas Veszprém Fejér Zala Békés Bács-Kiskun less developed regions Tolna Somogy Csongrád Baranya 25%* 30% 40% 50% + 10 % for medium enterprises + 20 % for small enterprises *after 2011: 10%

7. Changes in Regulation II. Changing eligible costs • Customs and duties are eligible • Non-deductible VAT directly connected to the purchasing of the assets is eligible • Costs of the demolition of a real estate are eligible • By SMEs the investor should maintain the subsidized capacities only for 3 years instead of 5 • Intangible assets are eligible up to 50% of the total eligible costs (up to 100% by SMEs) • Costs of the off-site infrastructure are not eligible • In case of a shared service centers wage related costs of the rented workforce are not eligible • All machinery and equipment has to be new (except by SMEs)

8. Changes in Regulation III. Administrative changes by individual cash grant • The method of applying for aid Filing the application form to ITDH. (In 2006: sending a LoI to the Minister of Economy.) • Starting date of the investment Investment costs raised after the acknowledgement of the aid application are eligible. (In 2006: investment costs raised after sending of a LoI)

9. ITDH: one-stop-shop also in subsidies 1. Individual cash grant at one window From 2007 March: instead of three public bodies (ITDH, Ministry of Economy and Transport, Hungarian Development Bank/MAG Zrt.) all procedures are concentrated at ITDH till signing the incentive agreement. 2. Strengthening ITDH with the mediation of other subsidies • ITDH is able and entitled to provide information on all kinds of subsidies • The agency can accept subsidy applications by development tax allowance and job creation subsidy

10. Thank you for your kind attention! Kamilla Szandrocha Head of Department for Incentive Programs ITDH Phone: +36 1 473 8262 Fax: +36 1 473 8260 Email: kamilla.szandrocha@itd.hu www.itd.hu