Representation tax waived for business lunches and pálinka

Representation tax

Concerning business operation in Hungary, “representation” involves everything a business does to make it feel comfortable for partners, clients, and employees alike. Expenses related to making your business feel hospitable incur a representation tax at 33.04%. It is made up of the personal income tax (15%) and the social contribution tax (13%) applied to a base of 118% of the expense.

The representation tax concerns not only office amenities, but also business meals, certain travel arrangements, and business gifts.

Exemptions from representation tax

Alcoholic beverages

Since November 2023, products purchased directly from vineyards and vineries are not subject to representation tax if they are meant as business gifts. The introduction of the exemption was meant to give a boost to Hungarian viniculture before the 2023 holiday season, especially since wine is a traditional gift in Hungary.

Starting from February 1, 2026, pálinka enjoys the same exemption. Pálinka is a traditional Hungarian fruit spirit or fruit brandy. It is a “Hungarikum”, which means that it is protected – similar to how only sparkling wine made in the Champagne region of France may be called Champagne. To give pálinka makers a boost, sealed pálinka created at and purchased from authorized tax warehouses (“adóraktár”) are not subject to representation tax if it is meant as a business gift.

Business-related meals at restaurants

By the same decree, restaurant meals paid by businesses are also exempt from representation tax if they are taken in a context of representation. This may involve a business, official, industry related, diplomatic, or religious event, as well as a public or religious holiday. For example:

• Business brunch with a potential client: OK (business setting)
• Company Christmas party at a restaurant: OK (religious holiday)
• Dinner at the end of a conference day: OK (industry related)
• Team building lunch at a restaurant: NOT OK (does not fit either of the above criteria)

Please note that the exemption applies only to food and drink served at restaurants. It does not apply to events catered by restaurants at external venues (e.g. at the company premises) and it does not apply to food and drink served at cafés, confectionaries, buffets, pubs, or bars.

Additionally, there are financial limits to the exemption. The total cost of business-related restaurant meals throughout the year cannot be more than 1% of the yearly revenue of the business, or HUF 100 million (whichever is lower). The total cost is calculated proportionately. If your business did not operate throughout the entire year (it was opened after the start of the year or closed down before the end of the year), the maximum is decreased in line with the length of the period of operation.

Make the most of your funds with Helpers Finance

Helpers Finance provides precise accounting and bookkeeping services to Hungarian SMEs, with a focus on supporting foreign owners and managers navigating Hungarian bureaucracy. When you are planning your budget, you can feel free to ask about any areas you are not sure about, including taxes on office amenities, business gifts, and other items related to brand representation in Hungary. Our colleagues will always be ready to answer your questions so you can make informed decisions.