Business meetings with clients, negotiations with partners, company lunches or welcoming guests — all of this often comes with expenses for food, drinks and gifts. These entertainment expenses are permissible through the company, but have specific tax treatment that you should be aware of.
In this manual, an accounting firm Rodi Consult (Varna) explains what is included in entertainment expenses, what tax is due, and how to use them correctly — updated for 2026.
In short: representation expenses (guests, food and drinks, celebrations, overnight stays) are tax-deductible, but they are subject to a tax on expenses of 10% (Art. 204 of the ZCPO). They require a connection with the activity and a document - even a receipt is sufficient. There is no right to a VAT tax credit.
What are representational expenses?
Under tax law, these are purchases of a representative or entertainment nature, related to:
- welcoming, staying and sending off guests and delegations;
- overnight stays;
- consumption of food and drinks;
- organizing business meetings;
- celebrations and entertainment events;
- excursions.
Important: the user must be external face (client, partner), not the company's staff. Employee benefits are not representational expenses.
The two mandatory conditions
- Activity link — the expense must create a good image with counterparties and bring current or future benefits. If it is not related to the activity, it is not representative and is treated as an unrecognized permanent tax difference.
- Documentary justification — it is even enough receipt (Art. 10, para. 6 of the CPC); an invoice is not mandatory.
The tax on expenses
On the representation expenses is due tax on expenses — 10% (Art. 204 of the CPC), on an annual basis, on the total amount VAT included (there is no right to a VAT tax credit). The tax itself is a recognized expense.
Example: for representation expenses of €9,500 including VAT, the company charges and pays tax on the expenses in the amount of 950 €.
Why is it profitable to declare them?
Many people hide entertainment expenses to avoid 10% tax. This is a mistake: when the expense is disclosed correctly, it reduces taxable profit and a tax saving is achieved. If it is not reported as representative, it becomes permanent tax difference, which is not recognized at all — and in effect you pay more. For the general logic of profit, see our article on corporate tax.
Representational vs. advertising costs
The distinction is important because advertising costs are tax-deductible and on them no Tax is due on expenses. Advertising is the promotion of goods/services and branded gifts (calendars, pens, mugs with the logo), within the usual framework of the activity. Symposia and conferences to present the products are also not representative, but inherent expenses.
Declaration and importation
The tax on expenses is declared with the annual tax return (Art. 92 of the CITA), in the part for tax on expenses. The deadline for filing and payment is June 30 next year.
FAQ
What are representational expenses?
Representation expenses are purchases of goods and services of a representative or entertainment nature: welcoming, staying and sending off guests and delegations, overnight stays, food and drinks, business meetings, celebrations and excursions. They are aimed at external parties - clients and business partners, not at staff.
What tax is due on entertainment expenses?
A tax on expenses of 10% (Art. 204 of the Civil Code) is due on representation expenses. It is charged on an annual basis on the total amount of expenses, including VAT. The tax itself is a tax-deductible expense.
Do I need an invoice for a representation expense?
Not necessarily. For representation expenses, the law allows documentation only with a receipt (Art. 10, para. 6 of the ZCPO). Therefore, a company lunch or dinner for business purposes is recognized even without an invoice from the restaurant.
Is there a right to a VAT tax credit for entertainment expenses?
No. According to the VAT Act, persons who incur expenses for representation and entertainment purposes are not entitled to a tax credit for these expenses. Therefore, the tax base for the tax on expenses also includes VAT.
What is the difference between representation and advertising expenses?
Advertising expenses (promotion of goods and services, including branded gifts with the company logo, within the usual framework) are tax deductible and are not subject to expense tax. Representation expenses are subject to 10% expense tax.
The conclusion
Entertainment expenses are a perfectly legitimate tool for building business relationships. The key is to report them correctly — with 10% tax on expenses — rather than hiding them, which is more expensive. And don't confuse them with advertising expenses.
Do you want to report them correctly? Explore Rodi Consult accounting services or is contact us. Phone: +359 893 474 576.
This article is for informational purposes only and does not constitute accounting or tax advice. Please consult an accountant for your specific situation.
