Tax‑Exempt Business Hospitality Expenses at Restaurants and Confectioneries - and Other Amendments

Taxation of Business Hospitality Expenses

The concept of business hospitality is inherently broad. It includes, for example, receptions, exhibitions, corporate anniversary events, or celebrations related to the closing of the financial year, during which invited guests receive high‑quality hospitality.

For tax purposes, business hospitality refers to business, official, professional, diplomatic, or religious events or occasions linked to the activities of the provider. What qualifies as business hospitality? In essence, any event or occasion organized for a specific purpose, connected to the provider’s business activities, where – based on societal norms – hosting guests is expected. Typical examples include business negotiations, board meetings, professional events, presentations, exhibitions, receptions, press conferences, congresses, conferences, or consultations. Beyond professional events, hospitality (food and beverages) provided in connection with national or religious holidays, as well as services related to the event (e.g., travel, accommodation, leisure activity), also qualify as business hospitality.

A key criterion for qualifying as business hospitality expenses is that a given benefit may only be treated as such if the true substance of the relevant documentation and circumstances clearly demonstrates that the event serves a purpose directly connected to the provider’s business activities. During tax audits focusing on business hospitality expenses, the tax authority typically examines the circumstances of the event’s organisation, the nature of the advertising and promotional activities, the route and destination of the trip, the accommodation arrangements and duration, as well as the proportion of genuine professional or religious programmes related to leisure activities.

As a general rule, the provision of business hospitality and business gifts is subject to taxation as other specific benefits. In the case of such benefits, the tax base is 118% of the value of the benefit, on which the payer is liable to pay 15% personal income tax and 13% social contribution tax. In practice, this means:

• if the cost of a business dinner is HUF 100,000,
• the tax base is HUF 118,000 (HUF 100,000 × 1.18),
• the personal income tax amounts to HUF 17,700 (HUF 118,000 × 15%),
• the social contribution tax amounts to HUF 15,340 (HUF 118,000 × 13%),
• resulting in a total tax burden of HUF 33,040 for a business dinner qualifying as business hospitality.
• In effect, the tax burden corresponds to 33.04% of the cost of the business dinner.

Following the entry into force of the decree, however, by way of derogation from the rules of the Personal Income Tax Act and the Social Contribution Tax Act applicable to other specific benefits, the income (i.e., the value of the benefit) arising from business hospitality provided in the form of hospitality (food and beverages) consumed in restaurants or confectioneries is exempt from tax up to 1% of the payer’s total annual revenue accounted for in the tax year, capped at HUF 100 million.

It is important to emphasize that the exemption does not cover the full scope of business hospitality as defined under the Personal Income Tax Act. While hospitality provided in a restaurant or confectionery is tax‑exempt, other related services (e.g., travel, accommodation, leisure programmes) do not fall within the scope of the exemption. According to the wording of the decree, the exemption also does not apply where food or beverages are not consumed on site (as hospitality, i.e. as a service), but are purchased for takeaway – for instance, confectionery products are bought and transported to a conference or meeting venue.  In addition, it remains uncertain how employers will verify whether a restaurant or confectionery is registered under the relevant business category, which constitutes a prerequisite for applying the exemption.

Not with standing these limitations, the introduction of the exemption is fundamentally favourable for companies, as business hospitality at restaurants and confectioneries —i.e., hospitality services (food and beverages) consumed on the premises—will not be subject to tax, provided that the annual value of such benefits does not exceed 1% of the payer’s total recognised annual revenue for the tax year, up to a maximum of HUF 100 million.

The amendment is applicable retrospectively to benefits provided in January (i.e., income arising from restaurant or confectionery hospitality provided after 31 December 2025), at least for taxpayers whose business year corresponds to the calendar year. For taxpayers with a non‑calendar business year, the exemption will not apply retrospectively; they may only apply the new rules for tax years beginning after 31 December 2025.

The Tourism Development Contribution Reduced by Half

A measure directly affecting the public charges of restaurants and confectioneries is the reduction of the tourism development contribution on restaurant and confectionery hospitality services from 4% to 2% (effective from 1 February). The reduced rate must already be applied when preparing the tax returns for the February 2026 filing period. This relief qualifies as de minimis state aid.

Extension of the Service Charge

The extension of the service charge reduces the labour‑related tax burden on employees working in restaurants and confectioneries. Under the amendment to Decree 44/2024 (XII. 9.) of the Ministry for National Economy, up to 20% of the monthly gross revenue may be treated as a service charge, even if it is not explicitly indicated as such on the issued invoices or receipts. A key requirement is that the 20% threshold applies to the combined total of the “presumed” service charge and any service charge explicitly itemised on the supporting documentation. This provision also applies from February 2026. Its significance lies in the fact that the “presumed” service charge – distributed among staff involved in providing hospitality services – is likewise exempt from personal income tax and social contribution tax and is subject only to the 18.5% social security contribution.

For taxpayers subject to the small business tax (KIVA), the service charge will not form part of the KIVA tax base for tax years beginning after 31 December 2025.

Bring Out Something Stronger!

From February onwards, the provision of certain alcoholic products is exempt from personal income tax and social contribution tax, provided that the product is acquired by the provider for the purpose of business or non‑business hospitality, or is intended to be given as a business gift or a low‑value gift, is produced in a tax warehouse and purchased directly from there, and bears the official pálinka excise stamp.

Consequently, pálinka may now also be given tax‑free as a gift – similar to bottled wine purchased directly from winemakers, which has been subject to comparable rules since 2023.

Points to Keep in Mind:

• Business hospitality provided in the form of hospitality (food and beverages) consumed on the premises of a restaurant or confectionery is tax‑exempt only up to the applicable threshold. Any portion exceeding this limit is subject to tax, and the provider must determine the tax advance as a liability of the quarter that includes the month in which the benefit was granted and must declare and pay it by the statutory deadline.
• Similarly to gift wine, the provider must also maintain appropriate records for gift pálinka. The register must clearly indicate the source of acquisition and the manner in which the product was used. 
• Continued attention should be paid to the risk of reclassification: e.g. benefits cannot be treated as business hospitality expenses where the employer—either explicitly or implicitly—invites employees primarily for entertainment purposes, including where such events serve as a form of reward or recognition. In light of the rule that a non‑cash benefit granted to employees as consideration for their performance may not be taxed under the regime applicable to other specific benefits, the per‑capita value of the trip (or event) in such cases qualifies as employment income for each employee.