On 30 January 2026, Government Decree 10/2026. (I. 30.) on measures aimed at improving the competitiveness of restaurants was published in the Hungarian Gazette. According to the decree the taxation rules affecting hospitality services in Hungary changed. The aim of the amendments is to encourage the use of restaurant services, reduce the sector’s tax burdens, and preserve pálinka as a hungarikum.
Tax exemption for restaurant hospitality
Businesses may account for entertainment benefits provided in the form of restaurant hospitality tax-free up to 1% of their total annual revenue accounted for in the tax year, but not exceeding HUF 100 million.
The exemption applies to food and beverage consumption, provided that the hospitality takes place in a restaurant, i.e. in a business type that meets the conditions defined in Decree 210/2009. (IX. 29.) of the Hungarian Government. According to this definition restaurant is where food is prepared on site. Accordingly, buffets, cafés, bars or delivered food are not covered by the tax exemption.
As regards the definition of entertainment, the Hungarian Personal Income Tax Act remains applicable: hospitality linked to a business, professional, diplomatic or religious event qualifies as such. The exemption therefore does not apply to hospitality provided during team building events without professional content; it does, however – for example – apply to a corporate Christmas dinner.
The new regulations will also apply retroactively to consumption in January 2026.
Reduction of the tourism development contribution
In parallel with the tax exemption of restaurant hospitality for entertainment purposes, the rate of the tourism development contribution payable after services related to restaurant hospitality has been modified from 4% to 2%.
Pálinka also became tax-exempt, following wine
The decree also extends the tax exemption to pálinka (a traditional Hungarian fruit spirit), provided that:
- it is offered in the context of hospitality for entertainment and non-entertainment purposes,
- as a business gift or
- as a gift of minor value.
The exemption shall apply from 1 February 2026. A similar exemption was previously introduced for wine products.
The conditions for exemption are as follows:
- the alcoholic product must be acquired directly from a tax warehouse,
- the product must bear a pálinka tax seal, and
- the provider must keep a separate record of the purchase and use.
What does all this mean compared to the previous burdens?
According to the Hungarian Personal Income Tax Act, income determined in the fiscal year based on the provision of entertainment and business gifts falls into the category of other benefits. Apart from entertainment costs and business gifts other benefits include:
- taxable income received once a year by way of a low-value gift (a low-value gift is a gift of goods or services worth less than 10% of the minimum wage), as documented;
- taxable income provided by means of free or discounted goods or services to which several individuals are entitled at the same time, and the payer, despite acting in good faith, is unable to determine the income earned by each individual;
- expenses incurred by the payer (including expenses for gifts given to participants at such events, provided that the individual value of the gift does not exceed 25% of the minimum wage per person) in connection with a free or discounted event organised for multiple individuals (including business partners) at the same time (if the event or function is predominantly hospitality or a leisure activity, as determined by the circumstances of the benefit).
Under the rules applicable to other benefits in Hungary, 15% personal income tax and 13% social contribution tax must be paid on 1.18 times the value of the benefit. With the entry into force of Government Decree 10/2026. (I. 30.), from 1 February this burden therefore no longer applies – beyond wine products – to restaurant hospitality provided for entertainment purposes below the specified threshold, nor to pálinka provided as a business gift.
If you have any questions regarding the taxation of other benefits or any other tax legislation, please feel free to contact the tax experts of WTS Klient Hungary, who are ready to assist our clients!
This article provides general information and does not constitute advice.
