In short, the term representation tax refers to the tax burden applied to the costs of corporate events, workshops, team building activities, business dinners, gala evenings, and Christmas dinners.
Representation tax covers the personal income tax and social contribution tax payable on the value of services provided during such events. Depending on the type of event, different elements of the total cost form the tax base.
Representation tax is not simply the 15% personal income tax and the 13% social contribution tax, because these are not calculated on the straightforward gross cost (which would be considered the individual’s income), but on that amount increased by 18%. As a result, the effective tax burden is 33.04%.
However, this is still not the end of the tax obligations. Under Section 124 (1) j), k) and (2) g) of the VAT Act, VAT on food, beverages, and catering services (i.e., restaurant invoices) cannot be deducted. In extreme cases, this can push the total tax burden close to 70%.
From this perspective, any reduction in this tax burden could indeed provide strong motivation for companies to organize such events. One element of the 5+1 point relief package announced by the Finance Ministry is the reduction of taxes related to events and restaurant consumption. If the representation tax (i.e., the PIT and social contribution burden) is reduced—potentially even to 1%, as promised—an increase in the number of corporate hospitality events can reasonably be expected.
Aside from the announcement, no concrete steps have yet been taken. No amendments have been published to the relevant legislation, so the exact rules remain unknown.
https://kormany.hu/hirek/100-milliard-forintos-akcioterv-az-ettermek-tamogatasara
Author: Gábor Kertész
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