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In the first part of the series, we reviewed the framework of the EU Directive and how it affects Hungarian legislation. The next step is to present how all of this can be translated into practice: what reporting obligations need to be anticipated, when a joint pay assessment must be conducted, and how HR processes and systems can be transformed to support pay transparency.
Reporting obligation: who is concerned, from when, and what must be reported?
The Directive determines regular reporting obligations based on headcount thresholds.
Large companies: annual reporting obligation.
Medium-sized companies: mandatory reporting every three years.
Employers must make the report transparently accessible to employees and their representatives.
The report must contain at least the following elements:
- average and median pay gap broken down by gender,
- differences in supplementary and variable benefits,
- the proportion of women and men by job category,
- the distribution of employees within the pay structure.
The purpose of the report is twofold: on the one hand, it provides an accurate picture of the company’s pay structure; on the other hand, it serves as a basis for necessary interventions. For HR, this represents an opportunity to turn pay data into a management decision-support tool, rather than merely a compliance document.
Joint pay assessment: when is it mandatory and how should it be conducted?
A joint pay assessment must be initiated if, within a job category, the pay gap between genders reaches or exceeds the threshold defined in the Directive (expected to be around 5%), and the difference cannot be satisfactorily explained by objective factors.
The purpose of the process is for the employer, together with employee representatives, to examine:
- job requirements,
- salary bands and remuneration practices,
- performance evaluation and promotion logic,
- any structural or subjective distortions.
The outcome of the joint pay assessment is an action plan containing concrete, deadline-bound measures (for example, a salary adjustment programme), as well as preventive measures against future imbalances.
From an HR perspective, this is a complex compensation audit that examines remuneration, career paths, performance management and organisational decision-making in an integrated manner.
Job evaluation and salary architecture: the foundation of the system
One of the greatest practical challenges of the Directive is translating the concept of “equal work or work of equal value” to company level. This requires a clear and consistent position architecture that includes:
- job families and levels,
- areas of responsibility and decision-making authority,
- required expertise and competencies,
- levels of experience and knowledge.
Job evaluation (analytical point systems, factor-based, benchmark-based or other methods) works effectively if all positions can be compared along a few key dimensions, such as:
- professional knowledge,
- degree of responsibility,
- complexity of problem-solving,
- impact on the organisation.
This enables the company to convincingly substantiate the logic according to which two positions belong to the same salary band – or what justifies a deviation.
Salary bands, total compensation and the “fair pay” system
Pay transparency examines the entire remuneration structure. Establishing or refining a banded salary structure is an important step, especially where the company has not previously operated with a unified salary architecture.
HR must establish clear rules regarding what justifies positioning within a band. Such factors may include:
- level of experience,
- specialised expertise,
- scarce competencies,
- extent of business responsibility,
- long-term performance.
Documented and consistently applied criteria directly reduce the risk that pay differences appear as unjustified discrimination.
Reporting, data analysis and system support
Fulfilling reporting obligations requires reliable, high-quality data. This demands unified HR and payroll master data, an organised job coding system and consistent, regulated data entry processes.
The pillars of a well-functioning pay transparency system:
- standard reports (average and median pay, salary band utilisation, distribution of benefit elements),
- automated statements supporting mandatory data provision,
- dashboards suitable for analysing time trends,
- cooperation between HR, finance and BI experts.
The objective is for pay transparency data to become real-time decision-support information for management.
Data protection, anonymisation and building trust
Payroll informatics is a sensitive and strictly regulated area. The company must precisely define:
- what data it processes,
- for what purpose,
- how long it stores the data,
- who may access individual-level data.
Where possible, aggregated and anonymised data should be used. HR’s task is transparent communication: employees feel secure when they understand data processing procedures and know what safeguards protect them.
Change management: how can the process be successfully implemented?
The introduction of pay transparency represents an organisational-level transformation. Successful implementation is supported by:
- regular status assessments,
- launching pilot projects,
- a scheduled implementation plan,
- leadership education and consistent communication,
- involving employees and addressing initial concerns.
For HR, this is an opportunity to strengthen the company’s credibility, promote a fair performance culture and, in the long term, reduce turnover and disputes.
What should be monitored in the upcoming period?
- Reporting obligations require a new data structure and system logic.
- Joint pay assessment is a complex HR project based on cross-functional cooperation.
- Job evaluation and salary architecture will form the foundation of a transparent compensation system.
- Data quality is a decisive factor in successful implementation.
- Supporting organisational culture is at least as important as legal compliance.
The next phase: depth of preparation
Pay transparency becomes a functional system when the organisation approaches changes not merely as a reaction, but as forward-looking development. Reporting obligations, joint pay assessment and strengthening job structures are all elements that, in the long term, lay the foundation for more stable, transparent and predictable operations. The next step is to examine how prepared the company is for these expectations, where the most critical gaps lie, and what developments can already be initiated today.
In the next part of the series, we will present how a Readiness Audit can be conducted: which HR areas should be addressed first, how pay transparency maturity can be measured, and what development sequence ensures the lowest risk and the greatest business advantage.
Our expert team provides support in conducting readiness audits, redesigning job structures and establishing salary frameworks. Contact us if you would like to plan your company’s pay transparency journey.
EU legal framework, Hungarian implementation and practical obstacles to introduction
The European Union’s Pay Transparency Directive 2023/970 introduces a new approach to enforcing the principle of “equal pay for equal work.” Although this fundamental principle has long been included in both domestic and EU regulation, in practice wage differences can still be identified where justification or detection poses difficulties. The current legislative step aims to establish a framework in which equal pay can be operated in a transparent manner based on objective criteria.
In Hungary, preparation for implementation has not yet begun at the level of detailed rules; however, Member States must transpose the provisions of the Directive into national law by 7 June 2026. This means that Hungarian employers will gradually face new compliance, HR process and data protection requirements in the coming years. Despite the uncertainty, it is advisable to prepare in time, particularly where the practical introduction of pay transparency will have an impact on business decisions and employee experience.
Which laws are expected to be amended?
The Hungarian transposition may affect several closely interconnected regulatory areas:
Labour Code (Mt.)
This may include the obligation to indicate salary ranges in job advertisements, the prohibition of questions regarding previous salary, and the objective determination of remuneration and promotion criteria. Employees’ right to information regarding pay may also expand.
Rules on equal treatment
A more precise definition of the concept of “work of equal value” is expected, as well as strengthening of the reversed burden of proof and expansion of the possibility of collective enforcement of claims.
GDPR and data protection issues
The processing of salary, performance and career data is a sensitive area. Detailed guidance from the Hungarian National Authority for Data Protection and Freedom of Information (NAIH) can be expected regarding which legal basis, level of anonymisation or data storage practice may be considered appropriate, particularly where the employer prepares gender-segregated pay reports or trend analyses.
Why is preparation complex at this stage?
HR and legal experts are working simultaneously at the intersection of three sets of expectations that are not yet finalised: the Labour Code, the GDPR and equal opportunities legislation each contain frameworks that require reinterpretation in light of pay transparency.
Three defining challenges appear to be emerging:
- The domestic detailed rules are not yet known. For example, the reporting frequency, headcount threshold, level of sanctions or method of supervisory inspections remain uncertain.
- Uncertainty in data protection interpretation. The regular analysis of salary data carries high risk from a data protection perspective. It is difficult to draw the line between lawful data processing and excessive data collection.
- Changing litigation risks. The numerical demonstration of pay differences and action plans linked to deviations exceeding 5% may create new types of disputes.
The current period is essentially a preparation phase: organisations are building the necessary processes, while the boundaries of obligations are not yet fully visible.
Labour Code – GDPR – equal opportunities: points of friction and expected directions
According to the new approach to pay transparency, salary data will in the future become one of the fundamental tools for enforcing equal treatment, rather than merely administrative data or a “business secret.” Employers must justify each salary offer based on the value of the position and the salary band policy.
- From a Labour Code perspective: The detailed, objective recording and communication of remuneration logic will become mandatory. The prohibition on asking about previous remuneration represents a significant change in recruitment practice.
- From a GDPR perspective: It must be ensured that the analysis of pay differences complies with the principles of data minimisation, purpose limitation and storage limitation – this will be particularly critical for analyses covering several years retrospectively.
- From an equal opportunities perspective: Due to the reversal of the burden of proof, the employer must demonstrate that identifiable differences are professionally justified.
Benchmarks, indicators and the professional role of HR
The effective functioning of pay transparency largely depends on whether the company is able to operate data-driven, consistent and transparent internal systems. Properly selected benchmarks help distinguish real risks from objective deviations.
Key professional focus areas:
- establishing salary bands based on objective job evaluation,
- structured collection of performance and career data,
- analysis of positioning within bands and relation to market median,
- preparing managers for future communication and legal expectations.
What should be highlighted for the upcoming period?
- The introduction of pay transparency represents a significant change in HR processes and organisational culture.
- Hungarian legislation will amend several areas simultaneously, resulting in complex implementation.
- Data protection requirements will play a decisive role in shaping pay reports and analyses.
- Due to the shift in the burden of proof, the justifiability of employer decisions will become particularly important.
- Preparation is also significant from a market competitiveness perspective, particularly in the areas of workforce retention and strengthening the employer brand.
Next steps of implementation
The application of pay transparency initiates a gradual change in mindset within organisations. Early preparation – establishing job evaluation systems, salary band policy and data-driven HR processes – already strengthens transparency and predictability in company operations. The next period will focus on how the expectations of the Directive can be translated into concrete HR practices: what data must be collected, what reports are required, and when joint pay assessment becomes mandatory.
In the next part of the series, we will present step by step the reporting obligations, the logic of joint pay assessment and the system-level changes necessary for establishing a salary architecture.
If you would like to prepare your organisation for pay transparency requirements, our expert team provides support from job evaluation through the establishment of salary bands to the development of reporting systems.
At the beginning of 2026, new regulations entered into force that significantly modify the tax treatment of corporate hospitality. Based on Government Decree No. 10/2026 (I.30.) on measures to improve the competitiveness of restaurants, certain representation benefits provided in the form of food and beverages consumed in restaurants and confectioneries have become tax-exempt up to a specific threshold.
This change is particularly relevant for businesses, as hospitality related to business meetings, maintaining partner relationships or professional events is a common part of corporate operations. At the same time, the application of the tax exemption is subject to strict conditions, and proper documentation plays a key role.
Below we provide an overview of the concept of representation, the main elements of the new regulation and the most important practical considerations.
What does “representation” mean under the Personal Income Tax Act?
The concept of representation is defined in the Hungarian Personal Income Tax Act (Act CXVII of 1995):
“Representation means hospitality (food and beverages) provided in connection with business, official, professional, diplomatic or religious events organised by the provider, as well as hospitality provided on the occasion of state or church holidays, together with services related to the event (such as travel, accommodation, leisure programmes etc.), provided that such benefits do not qualify as representation if, based on the documentation and circumstances of the benefit (organisation, advertising, itinerary, destination, place and duration of stay, proportion of professional or religious programme and leisure programme etc.), misuse of rights can be established even indirectly.”
Based on the above definition, hospitality provided in the framework of a business meeting (e.g. lunch or dinner) may qualify as representation.
By contrast, restaurant consumption provided during a purely recreational corporate team-building event does not qualify as representation, as it lacks a professional element.
Similarly, an event primarily aimed at hospitality or leisure activities does not qualify as representation.
The new regulation: tax-free restaurant and confectionery representation
The Government Decree No. 10/2026 (I.30.) on measures to improve the competitiveness of restaurants allows representation benefits provided in restaurants or confectioneries to be treated as tax-exempt under certain conditions.
The maximum amount of the tax exemption is:
- up to 1% of the company’s total annual revenue,
- but not exceeding HUF 100 million.
This rule may create more favourable conditions for corporate hospitality; however, it remains essential that the benefit qualifies as representation under the applicable legislation.
Proper documentation is essential
In the case of events organised for clients or business partners, it is particularly important that the documentation clearly supports the nature of the representation benefit.
In practice this means that:
- the professional purpose of the event should be identifiable,
- invoices and expenses should be clearly traceable,
- where necessary, an expense breakdown (e.g. in Excel) should be prepared indicating
- what was purchased,
- for what purpose,
- and in what amount.
Such documentation helps determine which expenses may be treated as tax-exempt representation within the statutory limits.
Which hospitality establishments fall under the decree?
A key condition for the tax exemption is that the hospitality must take place in a restaurant or confectionery defined by the decree.
According to Government Decree No. 10/2026 (I.30.):
Restaurant:
a hospitality establishment registered by the local commercial authority as a business type defined in Annex 4, point 1 of Government Decree No. 210/2009 (IX.29.).
Confectionery:
a hospitality establishment registered by the local commercial authority as a business type defined in Annex 4, point 3 of Government Decree No. 210/2009 (IX.29.).
Restaurant – main characteristics according to the regulation
According to Government Decree No. 210/2009 (IX.29.):
| Main product type | Hot meals |
| TEÁOR’25 code | 56.11 Restaurant services |
| Type of operation | Open year-round / seasonal |
| Service characteristics, equipment used, place of consumption | The service may be traditional or self-service, using reusable tableware (dinnerware, glasses, etc.). The establishment has a guest area and must provide the possibility of on-site consumption. |
| Kitchen characteristics, place of food preparation | Meals are prepared on site; the establishment has a cooking kitchen. |
Confectionery – main characteristics according to the regulation
| Main product type | Confectionery products, sweet goods |
| TEÁOR’25 code | 56.11 Restaurant services |
| Type of operation | Open year-round / seasonal |
| Service characteristics, equipment used, place of consumption | The service may be traditional or self-service, using disposable or reusable tableware (dinnerware, glasses, etc.). Providing the possibility of on-site consumption is not mandatory. |
| Kitchen characteristics, place of food preparation | Confectionery products are not necessarily prepared on site. |
Practical question: how can the establishment be identified on invoices?
In practice, it is often not clear from a receipt or invoice whether the consumption took place in a restaurant, confectionery or another hospitality establishment not covered by the decree.
As the tax exemption applies only to establishments defined by the regulation, it is advisable to clearly mark such invoices.
Therefore, we kindly ask to indicate on invoices:
“restaurant/confectionery – representation”
if the expense meets the above conditions and is intended to be treated as tax-exempt representation.
How Grant Thornton can help
The tax treatment of representation expenses often raises practical questions, particularly in relation to documentation, accounting and regulatory compliance.
Grant Thornton’s experts can assist with:
- the tax qualification of representation expenses,
- the development of internal policies,
- the review of documentation practices,
- and ensuring compliance with applicable legislation.
If you would like to review how the new rules can be applied safely within your organisation, please contact our experts.
We are happy to support the practical implementation and help minimise tax risks.
Obligations related to the global minimum tax (Pillar 2) are gaining momentum again in 2026. Although the regulation is already known to companies, the upcoming deadlines and administrative requirements have in many cases not yet become routine for Hungarian group entities.
Notifications and returns
For taxpayers with a calendar financial year, the first important step is the notification related to the expected tax liability, the deadline of which is 28 February 2026, which may already be familiar from last year; however, the submission deadline has been extended by two months.
This is followed by the GLoBE returns and advance payment obligations, which require not only technical administration but also preliminary data collection, group-level coordination, as well as local-level calculations:
- 30 June 2026: submission of the GLoBE return for the 2024 year (end of the 18th month following the tax year)
- 20 November 2026: submission of the GLoBE advance return for the 2025 year (20th day of the 11th month following the tax year)
Data collection challenges
The notification obligation itself does not depend on whether an actual top-up tax payment obligation arises; however, the intention to apply possible reliefs must already be indicated at this stage. Therefore, it is particularly important to clarify in time which entities fall within the scope of the regulation and who is responsible within the group for fulfilling the individual obligations. The notifications may require several types of information — particularly regarding parent and sister company obligations — the collection of which in practice may be more time-consuming than expected.
International background
The international regulatory environment continues to be refinedbased on OECD guidance and technical clarifications. These changes should also appear in the Hungarian legislation in the near future; therefore, up-to-date monitoring and early planning are increasingly key for companies.
Compliance with the global minimum tax is a process, not a one-off task
In relation to the global minimum tax, it is now clearly visible that compliance is not a one-time filing task but a continuously developing process. In the initial period, most companies focused on deadlines; the next step, however, is rather to ensure that group-level data, decisions and responsibilities are established in a stable manner.
Based on experience, the highest risk is not the lack of knowledge of the legislation, but when the necessary information only starts to come together close to the deadlines. Those who begin structured preparation in time can not only simplify administration but also significantly reduce the uncertainty of later accounting and tax decisions.
Practical interpretation of Decree No. 45/2025 (XII. 23.) of the Minister for National Economy
In our previous newsletter, we outlined the legislative changes affecting the accounting treatment of transfer pricing adjustments. In this article, we provide a more detailed overview of the key provisions of Decree No. 45/2025 (XII. 23.) of the Minister for National Economy, promulgated on 23 December 2025, which significantly revises the content and formal requirements of transfer pricing documentation.
The new rules must be applied mandatorily to tax years starting in 2026. At the same time, taxpayers may decide to apply the new provisions already to the local file for tax years starting in 2025. In such cases, however, the master file remains subject to the previous regulation, namely Decree No. 32/2017 (X. 18.) of the Minister for National Economy. The choice of timing requires careful preparation, given the increased level of detail and the objectives of the new requirements.
Purpose of the changes
The aim of the new decree is to enhance transparency, align Hungarian practice more closely with international transfer pricing standards, and support tax authority audits. To achieve this, the documentation requirements are more closely linked to transfer pricing data reporting and require more detailed analyses in several areas.
Why preparation is essential
The transition will involve additional administrative efforts and a review of existing documentation processes, particularly in the first year of application. The new regulation introduces several changes that affect the application of exemptions, the depth of analyses, and the preparation of underlying data.
Key changes introduced by the decree
The documentation exemption thresholds are revised. A threshold of HUF 500 million is introduced for the master file and HUF 150 million for the local file, while the full exemption previously available for cost recharges is abolished.
The scope of mandatory documentation elements is also expanded. Detailed transaction characterisation becomes required, together with a benefit test for services and a DEMPE analysis for intangible assets. In addition, database screening rules are tightened, and the preparation of segmented profit and loss statements distinguishing between related-party and third-party transactions becomes mandatory.
The decree also clarifies the practical application of the concept of related-party transactions. A related-party transaction may exist even in the absence of invoicing and may also arise in relation to transactions with natural persons. Requirements regarding the language and retention of documentation are tightened as well: documentation may only be prepared in Hungarian, English or German and must be retained for at least eight years.
Practical implications
Companies will be required to prepare more detailed and transparent schedules that clearly demonstrate the links between accounting and financial data. The alignment between transfer pricing documentation and data reporting will become closer, and taxpayers will be required to provide more detailed justifications for the application of exemptions.
Our recommendation
We recommend that companies review their related-party transactions at an early stage, prepare for DEMPE analyses and segmented profit and loss statements, and reassess their documentation processes. It is also advisable to consult with transfer pricing experts to determine the optimal timing for applying the new regulation and to evaluate the potential advantages and risks associated with early adoption.
Should you have any questions regarding the practical application of the new transfer pricing documentation rules, our transfer pricing advisory team will be pleased to assist.
Artificial intelligence (AI) is increasingly and visibly transforming corporate operations. The business use of the technology is spreading at a rapid pace, and AI is taking on an ever more significant role in optimising and enhancing the efficiency of financial processes as well.
However, lawmakers are not standing still either, and we are witnessing substantial developments in the regulatory environment. The European Union’s new regulation, the EU AI Act, may pose adaptation challenges for domestic companies that could dampen their appetite for innovation.
The regulation, which enters into force in August 2025, aims to regulate prohibited practices, the development and use of high-risk AI systems, their compliance, and, more broadly, the ethical boundaries of artificial intelligence. It establishes different categories for such systems: classification may range from low-risk systems to high-risk and even unacceptable-risk solutions. It also defines prohibited practices that may pose a threat to privacy, and restricts the use of AI systems that could significantly endanger the safety and fundamental rights of individuals or organisations.
The EU AI Act also requires transparency obligations from both developers and users of AI systems, imposing additional documentation and information duties on those concerned.
While EU-level regulation is gradually and steadily being integrated into domestic law, it is already coming within reach for Hungarian companies as well. The recently published Act LXXV of 2025 regulates the Hungarian implementation of the European Union’s 2024/1689 AI Regulation, and establishes the framework for setting up two new national authorities, which will begin their operations on the 31st day following promulgation (expected in December 2025).
National Accreditation Authority
As the AI Notification Authority, it will be responsible for designating and supervising organisations that carry out conformity assessments for high-risk AI systems. Designation may only apply to organisations with accredited status, and the authorisation may be withdrawn if the accreditation ceases. The authority will begin operations on the 31st day following promulgation (expected in December 2025).
Tasks of the AI Market Surveillance Authority
Its tasks include, among others, the ex-post monitoring of the lawful use of AI systems and the conduct of market surveillance procedures. This authority will also act as the sole national contact point towards the EU.
In addition, it has been empowered to impose administrative fines, which may be substantial for companies. When determining the highest fine amounts, the EU Regulation 2024/1689 must be taken into account, which sets a very high range for national authorities — between approximately HUF 285 million and HUF 13.3 billion.
Hungarian Artificial Intelligence Council
Alongside the two new authorities, the regulation also identifies a third body, intended to have a strategic and coordination role. While the National Accreditation Authority will assess technical compliance and the AI Market Surveillance Authority will conduct legality checks, the Hungarian Artificial Intelligence Council will not make decisions or conduct procedures, and therefore will not directly affect corporate operations.
The Council’s purpose is to support AI strategy and policy, and to coordinate the domestic application of AI. It will serve in an advisory capacity to the government, make recommendations, provide opinions, and coordinate the activities of the organisations involved.
Its members include representatives of state institutions, professional organisations, academia, and economic actors — for example, the Hungarian National Bank, the Hungarian Competition Authority, the Hungarian Academy of Sciences, and the Hungarian Chamber of Commerce and Industry. The body will meet quarterly, and its chair will be appointed by the Prime Minister.
AI is not only a technological decision
The rise of artificial intelligence requires not only technological adaptation but also legal compliance from companies. As organisations strive to keep pace with innovation, it is essential that they prepare in time for the new AI regulations, particularly the requirements of the EU AI Act. For safe and lawful application, companies must understand the risk classification of AI systems, the regulatory expectations arising from their use, and the potential risks of non-compliance.