KATA is a tax scheme in Hungary suitable for self-employed individuals looking for an easy way to manage their tax obligations.
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- What is the KATA tax scheme?
- What does KATA tax cover?
- What about VAT on the KATA tax scheme?
- When and how does KATA tax get paid?
- Are there any special rules for the KATA tax scheme?
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 2020, the monthly amount is 50,000 HUF or 75,000 HUF depending on your needs, or if you already get paid at least 36 hours per week from a Hungarian employer on top of your self-employed work, the amount is reduced to 25,000 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.
There is, however, an income limit for this scheme. If you invoice more than 12,000,0000 HUF per year you must pay 40% on the extra income.
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 12,000,000 HUF per year. If and when you exceed this limit, VAT must be charged.
Regardless of exemption status, all foreign billings must be declared on a VAT declaration each month.
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.
Are there any special rules for the KATA tax scheme?
There is a list of 7 KATA requirements. 5 out of 7 of these requirements must be met (so if two are true, it is okay).
1. You do not exclusively run your business activities alone.
2. Your income from one client has to be less than 50% of your total income
3. The client cannot instruct the one using KATA with regards to how to execute the business activity.
4. The property where you run the business is in your possession or you have a letter from the owner allowing the address to be used as the seat of the business.
5. Your tools, devices for running the business are yours and in your possession.
6. Working hours are defined by you and not determined by the customer.
7. All invoices should not go to only one client.