Starting from the middle of November 2023, wine products sold by vineyards will be exempt from representation tax in Hungary. The decision is expected to give a boost to the wine sector at the end of the year, when business gifts are due to raise revenues for the holiday season.
Representation tax in Hungary
In Hungary, companies must pay a so called representation tax on catering-like purchases such as coffee to be offered in the break room or to clients. It was created to deter small businesses from charging personal purchases on the company and deducting the relevant expenses from their taxes. Business gifts to be sent to clients and partners are also subject to this tax.
Representation tax is 33.04% of the purchase price. It is calculated by applying the personal income tax (15%) and the social contribution tax (13%) to the 118% of the item purchased. For example:
- Business gift: HUF 100,000
- Representation tax base: HUF 118,000
- Representation tax: HUF 118,000 * (0.15 + 0.13) = 118,000 * 0.28 = HUF 33,040
New regulation favors vineyards
Gifting wine has a long tradition in Hungary. Good wine has a price, however, and Hungarian vineyards have long been campaigning for an exemption. Demand noticeably decreased after the 2010 introduction of the tax, and the exemption announced just in time before companies start thinking about holiday gifts might bring a revenue influx to the sector.
According to a government decree issued last week, wine products purchased directly from vineyards are exempt from the representation tax in Hungary starting from 16 November 2023. The exemption includes not only bottled wine purchased to become business gifts, but also wine consumed during wine tastings and wine dinners, traditionally popular programs for team buildings or as a celebration of successful business meetings.
Discuss business gifts with your accountant
Since business gifts are subject to representation tax in Hungary, make sure to discuss them with your accountant before you commit to the purchase. This way you get a better grasp on the full costs and can plan your finances accordingly. With the new regulation, wine products will soon become exempt from this tax, starting a new era of gifting wine to business partners in Hungary.
Helpers Finance provides accounting services to small and medium-size businesses in Hungary, with a focus on working with foreign owners. Calculating the representation tax is part of the service, and precise bookkeeping lets you remain up-to-date about your finances, supporting informed business decisions.
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