KATA tax in Hungary explained (updated 2023)

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KATA is a tax scheme in Hungary suitable for self-employed individuals looking for an easy way to manage their tax obligations.

Contents

What is the KATA tax scheme?
What does KATA tax cover?
Is there a maximum income limit for the KATA scheme?
Who is the KATA tax scheme open to?
Who’s not able to use the KATA tax scheme?
What’s the alternative to KATA?
What about VAT on the KATA tax scheme?
When and how does KATA tax get paid?

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On Jul 14th 2022, the government announced significant changes to the legislation surrounding KATA that will significantly narrow the number of people eligible to use the scheme. Information on this page relates to the KATA tax scheme in its current form. It will be updated when changes go into effect - due in September 2022. There are alternative ways for freelancers and entrepreneurs to manage their taxes and this page will shortly be updated with more information. More discussion can be found in the KATA Help Facebook group.

What is the KATA tax scheme?

KATA is a flat-tax system where you pay a fixed monthly amount to cover all your Hungarian tax obligations as a self-employed person.

As of 2022, the monthly amount is 50,000 HUF.

What does KATA tax cover?

This monthly payment covers all your obligations meaning you do not need to pay any extra personal income tax, pension, or social security contributions.

You will need to pay 5,000 HUF per year to the Hungarian Chamber of Commerce (known locally as BKIK). This is mandatory.

Is there a maximum income limit for the KATA scheme?

If you invoice more than 18,000,0000 HUF per year you must pay 40% tax on the extra income.

Who is the KATA tax scheme open to?

The KATA scheme is open to self-employed entrepreneurs resident in Hungary that want to charge other individuals for goods and professional services - like consulting, teaching, beauty services, etc.

Who’s not able to use the KATA tax scheme?

Anybody selling goods or professional services to other businesses.
Anyone selling goods or professional services to foreign entities.
Anybody who’s not working as self-employed full time. Students and those with other jobs may not use KATA.

Only tax drivers are exempt from these restrictions.

What’s the alternative to KATA?

For most, the flat tax scheme is the most suitable option.

Under this scheme, you pay 15% income tax on 60% of your business revenue. In this case 40% of your revenue is considered as expenses. For some types of businesses, these percentages are different.

You’re also required to pay an 18.5% social security contribution and 13% social contribution tax on your base income - this covers your healthcare and pension.

Local business tax is also due to the municipality where your business is registered.

What about VAT on the KATA tax scheme?

You'll be given a VAT number upon registration. You can opt to be exempt from charging VAT if you invoice less than 18,000,000 HUF per year. If and when you exceed this limit, VAT must be charged.

When and how does KATA tax get paid?

The monthly contribution must be paid by the 12th of the following month. Any extra tax due from exceeding the earnings limit must be paid by February 25th of the following tax year. The tax year in Hungary is January 1st to December 31st.

You can pay the KATA contribution by bank transfer.