New Tax Rules for Restaurant Representation

Based on Government Decree 10/2026. (I. 30.), certain personal income tax and social contribution tax obligations related to representation expenses, as well as products provided as business gifts, within the framework of representation or taxable hospitality, or as low‑value gifts, will be amended retroactively as of 1 January 2026.

Restaurant representation

Under the previous regulations, if the provider (payer) did not qualify as a taxpayer subject to special accounting rules (e.g. associations, public bodies, ecclesiastical legal entities, or foundations), all benefits deemed to qualify as representation (and forming part of the tax base) were taxable as “certain specified benefits.” Accordingly, the provider was required to pay 15% personal income tax and 13% social contribution tax on 118% of the value of the benefit, declared and paid quarterly.

Pursuant to the Government Decree, restaurant hospitality (food and beverages) provided as representation can be treated separately from other representation‑related benefits, and from 1 January 2026 these will be subject to different rules in terms of both associated tax burdens and administrative obligations.

The portion of restaurant representation that does not exceed 1% of the taxpayer’s annual revenue, up to a maximum of HUF 100 million, becomes tax‑exempt. It is important to note that the annual threshold is aligned with the taxpayer’s business year. Taxpayers commencing or terminating their activities mid‑year may apply the threshold on a pro‑rated basis. Any amount exceeding the above limits remains subject to 15% personal income tax and 13% social contribution tax, calculated on the increased tax base.

If the taxpayer exceeds the HUF 100 million threshold during the tax year, the tax obligations on the excess must be declared and paid as part of the tax liabilities of the calendar quarter including the month of the benefit. Should the taxpayer grant further restaurant representation benefits during the remainder of the tax year, their value will already be taxable quarterly under the general rules.

As a second step, during the preparation of its annual (non‑consolidated) financial statements, the provider must review the extent of restaurant representation that can be accounted for as tax‑exempt based on 1% of the annual revenue. If the maximum amount calculated from annual revenue does not support the tax‑exempt amount previously applied during the year, the provider must pay the tax liability arising from the difference by the 12th day of the quarter following the month in which the annual revenue was determined. Therefore, if the financial statements are prepared by 31 May and a difference is identified, the corresponding tax liability must be declared and paid by 12 July.

It is essential to note that the tax‑exemption applies exclusively to restaurant representation. For representation provided at other locations (e.g. external venue with catering), the tax‑exempt treatment is not available. Additional questions may arise if the invoice for restaurant representation includes other costs (e.g. room rental, audio equipment, performance fees, etc.).

The Decree does not redefine the concept of representation; therefore, the definition under the Personal Income Tax Act continues to apply. (For example, hospitality provided for the sole purpose of employee entertainment without professional or business content does not qualify as representation.)

Pálinka as a gift

Taxpayers may provide products to business partners—or even their own employees—under several legal titles. These benefits generally become taxable as “certain specified benefits,” provided the statutory conditions are met. In such cases, the provider must pay 15% personal income tax and 13% social contribution tax on 118% of the value of the benefit.

These benefits may qualify as:

• representation;
• business gifts;
• gifts provided within non‑representational hospitality or events, provided the individual value of the gift does not exceed 25% of the minimum wage; or
• low‑value gifts, up to three times a year, each not exceeding 10% of the minimum wage.

A previous regulation already removed from this category bottled wine products with protected designation of origin, purchased directly from vineyards or wineries.

Following this model, a new rule provides tax exemption for pálinka granted under the above benefit categories. Thus, alcohol products produced in a compliant excise warehouse and purchased directly from there, bearing the required pálinka stamp, may be provided tax‑free, provided the giver maintains records clearly indicating the source of procurement and the method of use.