Representation costs: the threshold or the 80 per cent option?

Which costs fall under the restriction?

The deduction restriction applies to a fixed list of mixed costs. It covers food, drink and stimulants, representation such as receptions, festive gatherings and entertainment, and conferences, seminars, symposia, excursions and study trips, including the travel and accommodation costs that go with them. Not because they would not be business costs, but because they contain a private element that the law skims off at a flat rate.

Many costs that sit close by fall outside it and are therefore fully deductible. Think of a course or training that is not a conference or study trip, of trade literature, and of advertising and sponsorship. Office costs, software subscriptions and tools also sit outside this scheme. The distinction lies in the social element: where there is eating, drinking or hosting, the law cuts in.

Two methods: the threshold or 80 per cent

The main rule is the threshold. Of all your mixed costs together, in 2026 the first € 5,700 is not deductible; everything above that you deduct in full. If in one year you have € 2,000 of such costs, this method leaves nothing deductible. That feels unfair, which is why the second method exists.

Instead of the threshold, as an entrepreneur for income tax purposes you may choose to deduct 80 per cent of those costs. The threshold then disappears entirely. With € 2,000 of mixed costs you deduct € 1,600 rather than nothing. You make the choice per year and for the total of these costs, not per item. The tipping point sits at € 28,500 of mixed costs: below that, 80 per cent is better; above it, the threshold.

VAT follows its own track

The income tax restriction says nothing about your VAT. Separate rules apply to VAT, and for representation they are often stricter. VAT on food and drink consumed on the premises of a catering business is never deductible, even if the conversation was entirely business. That VAT belongs to your costs and is booked as part of the amount.

For business gifts and benefits a limit of € 227 excluding VAT per recipient per year applies. Stay below it and you may deduct the VAT. Go above it and the deduction lapses for the whole amount for that relation. Conference and attendance fees are a different case: their VAT is in principle deductible, except the part relating to food and drink.

• VAT on catering consumed on the spot: not deductible, the amount including VAT is your cost.
• VAT on a caterer delivering at your office: usually deductible, because that is not a catering venue.
• VAT on business gifts: deductible up to € 227 per relation per year, excluding VAT.
• VAT on conference attendance: deductible, but split out the food and drink component if it is stated separately on the invoice.

Have a private limited company? Then other percentages apply

If you work through a private limited company, corporate income tax has its own version of this scheme. The company deducts 73.5 per cent of these mixed costs, or chooses a threshold of 0.4 per cent of total wages with a minimum of € 5,700. In a company with a single director-shareholder and a modest salary, that threshold almost always lands on the minimum, which usually makes the 73.5 per cent variant more favourable.

If you are unsure whether a cost falls under the restriction, look at its nature rather than the supplier. An invoice from a restaurant for a meeting room with coffee is largely room hire; an invoice from the same restaurant for a dinner with four business relations falls under the restriction. When in doubt, record who was there and why, because that is exactly what an inspector asks. See also the overview in which costs are deductible.

Frequently asked questions