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Hungary Wins ‘Pálinka War’: EU Allows Tax-free Fruit Distillate for Household Consumption

MTI-Hungary Today 2020.08.06.

Hungary’s finance ministry is reviewing the possibility of introducing a tax exemption on pálinka, the national eau de vie, as early as 2021, a year before a recently issued European Union directive allows the preference, state secretary András Tállai told MTI.

Tállai noted that EU directive 2020/1151 – of July 29, 2020 – allows member states to declare fruit distillate for household consumption tax free up to 50 litres per year from January 1, 2022.

He said parliament could vote on measures transposing the EU directive into national legislation as soon as the autumn.

At present, a 700 forint (EUR 2) distillate stamp must be purchased for every litre of pálinka distilled for private consumption.

EU directive 2020/1151 allows the full tax exemption for fruit distillate “that is consumed by a private individual, the members of his family or his guests, provided that no sale is involved” and which is “produced by that private individual from fruits owned, grown and supplied by that private individual from a plot of land to which that private individual holds a title”. The exemption applies to spirits distilled in small home distilling devices as well as to spirits distilled at larger contract distilleries.

Pálinka Market Shrinks as Home Brewing on the Rise
Pálinka Market Shrinks as Home Brewing on the Rise

Thanks to the growing popularity of home brewing, the black market, and the implementation of the Public Health Product Tax (NETA), pálinka’s commercial market has decreased by 60% in a year, resulting in certain manufacturers’ struggle to survive. Grand master of the Pálinka Knights Order, Attila Barabás, revealed that while in 2019, 1.12 million liters of 50% fruit […]Continue reading

The EU directive also stipulates that member states must “lay down conditions for the purpose of preventing any evasion, avoidance or abuse” of the exemption.

Featured photo illustration by Tamás Sóki/MTI