When you as a managing director of a Hungarian company go on a business trip, most of your business related travel costs are deductible from your corporate tax, while you will be required to pay a representation tax on some of them. Read on to learn how to differentiate and better plan your travel expenses.
A business trip is when you as a managing director visit another city or another country to meet clients or suppliers, or attend a conference related to the field of operation of your Hungarian company (of course, other reasons are also possible). Only expenses strictly related to business can be paid for by company money.
E.g.: The airplane ticket, hotel reservation and meals can be covered by the company. Visiting a museum while you are there cannot – the entrance tickets are NOT company related business travel expenses. If you happen to pay with your company credit card as an accident, you will have to pay it back to your company.
In general, the costs related to a business trip are accepted as business costs in Hungary, and as such are deductible from the corporate tax. Some expenses, however, are subject to the so called “representation tax” (read more about it here). As a rule of thumb, everything related to the trip itself (taking a taxi to the airport, airplane ticket, accommodation, conference ticket) can be deducted, while everything related to meals and other entertainment (e.g. having dinner at a restaurant, taking a taxi to the hotel after dinner) is taxed with the representation tax.
Accordingly, let us clarify some typically complex cases:
1. If your flight ticket contains a meal or your accommodation prices contain breakfast, the representation tax will not apply
2. If you buy any food or drink for yourself on the plane, or if your meals are listed as separate items on the invoice for accommodation, the representation tax will apply.
For some further typical examples of costs charged with the representation tax, take a look at our table here.
When on a business trip, you have to keep documenting the expenses of your company, since they will have to be reported to the Hungarian tax authority. You have to register all your expenses in a travel expense report (for which your accountant can provide a template), while it should also contain proper justification for your traveling.
Put only those travel expenses on your company’s account that you can support with documents sufficiently, as the Tax Authority expects you to be able to justify and certify company expenses related to your business trip.
Accordingly, you always need to ask for a proper VAT invoice issued to your company’s name (including your company’s seat address and VAT number). In Hungary, you will be able to get a VAT invoice for everything, but that might not be the case abroad. If that happens (e.g. with train tickets, public transportation, taxi), you must simply keep the receipts and include them in the travel report. Many airline companies do not offer the option for requesting an invoice on their online interface, while they do offer it upon request. As a result, make sure to give a call to the customer support of the airline to see if they can provide an invoice separately. If not, then save a copy of the correspondence for the records, as you will be required to submit the flight ticket (containing your name) and the copy of the correspondence to your accountant.
Let’s sum it up
The above only apply if you make the business trip as a managing director of your Hungarian company. If your employees are the ones making the business trip, some further regulations apply to their travel expenses. Consult your accountant in advance!
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