Exemption from Representation Tax!

Government Decree 10/2026 (I.30.) on the tax reduction previously announced in the Government’s communication — aimed at improving the competitiveness of restaurants — was published in Issue 12/2026 of the Hungarian Gazette. Although many expected direct support or a specific tax reduction for hospitality businesses, the Ministry ultimately reduced the representation tax only. As a result, the measure only indirectly supports the hospitality sector: for restaurants to have more guests and higher revenue, businesses must actually go out for business lunches or organize events in restaurants.

The Decree is only two pages long and raises several questions. We expect the tax authority (NAV) to provide clarifications during future application of the rules. Until then, here are six important questions and our current position on each.

Which services fall under the representation tax exemption? (team‑building, business lunch with a partner, etc.)

The Decree explicitly provides an exemption for representation benefits provided in a restaurant. Therefore, we must rely on the definition of representation in the Personal Income Tax Act, which covers hospitality (food, beverages) and services related to an event (travel, accommodation, leisure programs, etc.) provided in connection with a business, official, professional, diplomatic, or religious event, or on the occasion of state or religious holidays.

Thus, the exemption applies only to events with a business or professional purpose (e.g., corporate presentations, client events, business lunches). Events aimed purely at entertainment — such as team‑building events — do not qualify for the exemption.

Is it necessary to request an invoice, or is a bank card receipt still sufficient?

Requesting an invoice is recommended in all cases, as it is subject to such content and formal requirements that fully meet standards of accounting document as such.
However, if issuing an invoice is not possible (e.g., the restaurant cannot issue one for a bank card payment, or the business lunch takes place abroad), a receipt is also acceptable. The value of the benefit can be directly determined from the receipt, and under Annex 3, Section B, Point 21 of the Corporate Tax Act, restaurant representation is recognized as a deductible expense even against a receipt.

The 1% threshold equals with 1% of what exactly?

The total revenue of the given tax year must be taken into account.
Thus, the exemption threshold for 2026 is 1% of the total 2026 revenue.

Since annual revenue can only be estimated during the year, no tax advance must be calculated until restaurant food‑and‑beverage consumption reaches the absolute limit of 100 million HUF.
Any representation exceeding this threshold becomes taxable once the total annual revenue is determined, meaning the tax must be calculated, declared, and paid (if the advance does not cover it) at the time of preparing the annual financial statements.

If an employee on a business trip abroad attends a business lunch with a partner, does the exemption apply?

Yes. The exemption also applies to foreign representation, within the value limit.

Does the exemption apply to the employee’s own restaurant meals during a business trip?

No. A posted/assigned employee’s own restaurant consumption without business partners does not qualify as representation.

If a small team (3–4 employees) goes to a café for a team‑building‑type meeting, does the exemption apply?

No. Team‑building events do not qualify as representation under the Personal Income Tax Act; instead, they fall under Section 70 (6) b), which covers events “primarily aimed at hospitality or leisure programs.”
Furthermore, the Decree limits the representation tax exemption strictly to on‑site consumption in restaurants. Consumption in cafés or confectioneries is taxed under the normal rules.

Tower Consulting, a Budapest‑based accounting and payroll company, together with its cooperating partners, is available to assist you with any accounting, payroll, or tax advisory matters in Budapest or anywhere in the country via remote, online channels.

Author: Gábor Kertész

Update: Based on the amendments published in Issue No. 17 of the Hungarian Gazette on 13th February, the tax exemption for representation expenses and decrease of tourism development contribution can now be applied not only to restaurant services but also to consumption in confectioneries. Similarly, the 20% increase of the service charge threshold and the simplified assessment method will also be available for confectioneries. An additional favourable amendment is that, for restaurants and confectioneries taxed under the KIVA regime, the service charge will not be considered part of the KIVA tax base. (17.02.2026)