The Expat’s Guide to Hungary’s Flat-Rate Taxation (Átalányadózás) in 2025

1. What Is Flat-Rate Taxation (Átalányadózás)?

In essence, átalányadózás is a simplified personal income tax regime designed for individual entrepreneurs in Hungary. Instead of tracking and documenting every business expense (which can be time-consuming and requires detailed bookkeeping), you apply a fixed “deemed cost” percentage to your revenue.

Why expats love it:

• Minimal bookkeeping requirements
• Predictable tax liability
• Generous tax-free allowance for lower-income entrepreneurs
• Relatively straightforward rules once you understand the basics

If you’re comparing different tax options, you might also want to look at the KATA tax system, which is another popular option for certain types of small businesses in Hungary.

2. Who Can Use Flat-Rate Taxation?

Eligibility Requirements

You can opt for flat-rate taxation if you are:

• A Hungarian tax resident (staying in Hungary for more than 183 days per year or having your “center of vital interests” here)
• Registered as an egyéni vállalkozó (sole proprietor)
• Operating below certain annual revenue caps (more on this below)

No prior-year revenue is needed to qualify—even new businesses can elect this taxation method right from the start.

Who Cannot Use It

You cannot use átalányadózás if you:

• Are currently under KATA, EVA, or other specific tax regimes
• Exceed the annual revenue caps
• Have had tax violations related to invoicing or receipt issuance (NAV may revoke your eligibility)

3. Revenue Caps: Know Your Limits

Your eligibility depends on staying under these annual revenue thresholds (2025 figures):

• Standard activities: Up to 10× the annual minimum wage = HUF 34,896,000
• Retail trade/postal activities: Up to 50× the annual minimum wage = HUF 174,480,000

If you start or stop your business mid-year, these caps are prorated by the number of months you’re active:

Cap = (Annual cap ÷ 12) × Number of active months

For example, if you start a standard business in July 2025, your revenue cap for the year would be HUF 17,448,000 (half of the full-year cap).

4. How Flat-Rate Taxation Works: The Basics

The fundamental principle is simple:

1. You earn revenue from your business activities
2. You apply a fixed “deemed cost” percentage based on your activity type
3. You pay 15% personal income tax on the remainder (with certain exemptions)
4. You pay social contributions based on either this amount or minimum thresholds

The beauty of this system is that you don’t need to keep track of actual expenses—the deemed cost percentage is applied automatically, regardless of what you actually spent.

5. Calculating Your Tax Base: Deemed Cost Rates

Your tax base depends on your type of business activity. Here are the deemed cost rates for 2025:

Deemed Cost Allowance	Typical Activities
40%	General trades, creative services, retail
60%	Professional services (consultants, IT specialists, lawyers, health professionals)
80%	High-cost activities (certain technical and manufacturing operations)
90%	Postal services and specific retail categories

Activity Codes & Cost Allowances

The exact classification of your business activity is crucial:

• NAV ties your deemed-cost rate directly to your ÖVTJ activity code (as of 2025, TESZOR codes are no longer used)
• Selecting the wrong activity code can trigger tax audits or result in applying an incorrect cost allowance
• Check the official NAV activity code list to verify which deemed cost percentage applies to your specific business activity

Calculation Formula:

Taxable income = Gross revenue × (1 – Deemed cost %)

Example 1: IT Consultant (60% deemed cost)

Let’s say you’re an IT consultant who earned HUF 10,000,000 in 2025:

• Taxable income = HUF 10,000,000 × (1 – 0.60) = HUF 4,000,000

Example 2: Retail Business (40% deemed cost)

If you run a small shop with HUF 15,000,000 in annual revenue:

• Taxable income = HUF 15,000,000 × (1 – 0.40) = HUF 9,000,000

6. Tax-Free Allowance: A Major Benefit

One of the biggest advantages of flat-rate taxation is the tax-free allowance. In 2025, income up to half the annual minimum wage is completely exempt from personal income tax.

2025 Tax-Free Amount: HUF 1,744,800

This means that if your calculated taxable income (after applying the deemed cost percentage) doesn’t exceed this amount, you’ll pay zero personal income tax on your business income.

If your income exceeds this threshold, only the portion above HUF 1,744,800 is taxable.

Example:

Going back to our IT consultant with a taxable income of HUF 4,000,000:

• Tax-exempt portion: HUF 1,744,800
• Taxable portion: HUF 2,255,200
• Personal income tax (15%): HUF 338,280

7. Social Contributions: The Other Side of the Coin

While the personal income tax rules are straightforward, social contributions add another layer to consider:

For Full-Time Entrepreneurs:

• Social Insurance Contribution (TB): 18.5% of your contribution base
• Social Contribution Tax (szocho): 13% of your contribution base

The important thing to understand is that even when your business has low revenue or you’re in the tax-exempt range for personal income tax, you’ll still need to pay these contributions based on at least the minimum wage (HUF 290,800 per month in 2025) or guaranteed wage floor (HUF 348,800 for certain skilled activities).

For social contribution tax specifically, the minimum base is 112.5% of these amounts.

For Part-Time Entrepreneurs:

If you’re operating your business alongside a 36+ hour/week job or as a full-time student, different rules apply. You’ll only pay contributions on your actual flat-rate income that exceeds the tax-free allowance.

For Pensioners:

Good news! If you’re a pensioner, you’re exempt from both social insurance contributions and social contribution tax.

Health Coverage for Family Members

As a registered TB-payer, you have the option to extend your health coverage to dependent family members:

• You can voluntarily add a spouse or child to your health insurance for a small monthly fee
• This is particularly valuable for expat families who might not otherwise have access to Hungary’s public healthcare system
• To register family members, visit your local government office (kormányablak) with your family members’ identification documents

8. VAT Considerations

The flat-rate taxation system only covers personal income tax and related contributions—it doesn’t automatically exempt you from Value Added Tax (VAT).

However, small businesses with annual revenue below HUF 18,000,000 (increased from HUF 12,000,000 as of January 2025) can opt for VAT exemption (“alanyi adómentesség”).

If you choose this exemption:

• You won’t charge VAT on your sales
• You can’t reclaim VAT on your purchases
• You must apply by February 28 via the ONYA system

If your revenue exceeds this threshold, you’ll need to register for and charge VAT on your services or products.

Foreign-Currency Revenue & Exchange Rates

If you work with international clients and receive payments in foreign currencies:

• All non-HUF income must be converted at the Magyar Nemzeti Bank’s (MNB) official daily exchange rate on the date you receive payment
• Keep documentation of the exchange rate used (a screenshot of the MNB rate page is sufficient)
• Include this converted amount in your revenue register

Example:

If you invoice €5,000 to a client on March 10 (when the MNB rate is HUF 380), you would record HUF 1,900,000 in your revenue register.

Cross-Border Services & Double Taxation

When providing services internationally as an átalányadózó entrepreneur:

• Double Tax Treaties: Hungary has agreements with most Western countries to prevent double taxation. If you’re paying tax in your home country as well, check if you can claim foreign tax credits.
• Reverse-Charge VAT: When selling services to business customers (B2B) in other EU countries, you generally don’t charge Hungarian VAT. Instead, the reverse-charge mechanism applies, where your client self-accounts for VAT in their country.

9. Payments and Reporting: Key Deadlines

Quarterly Obligations:

• Quarterly tax prepayments: Due by the 15th day of the first month of each quarter (January 15, April 15, July 15, October 15)
• Quarterly social contribution returns: Submit Form 22T1041/2258 by the 15th day of the month following each quarter

Annual Obligations:

• Annual tax return: Submit Form 24SZJA by May 20 each year
• Electing flat-rate taxation: For existing businesses, declare in your annual tax return by May 20
• New businesses: Elect when registering via Form 22T101E
• VAT exemption election: Apply by February 28

Payment Methods & NAV Access

• Bank transfers: Most expats pay via bank transfer using their ONYA-generated payment ID codes
• Online payment: You can pay directly through the NAV Ügyfélkapu (Client Gateway) portal
• Multi-currency accounts: If you hold EUR or USD accounts, ask your bank about real-time HUF conversion options to ensure NAV receives payments in HUF on time
• Standing orders: Consider setting up recurring payments with your bank to avoid missing deadlines

Local Business Tax (HIPA)

Beyond your national tax obligations, you’ll also need to handle local business tax (helyi iparűzési adó or HIPA):

• Most municipalities levy a local business tax of up to 2% on your net sales (revenue minus your cost allowance)
• Átalányadózás only covers your personal income tax and social contributions—you’ll still need to register with your local municipality (önkormányzat) and file/pay HIPA separately
• Check your specific municipality’s rate and deadlines; many use the same ONYA/ÁNYK portal system as NAV

Late-Payment Interest & Penalties

If you miss payment deadlines or filing requirements:

• Interest rate: NAV charges daily interest at the Hungarian National Bank base rate + 5% (only if accumulated late-interest exceeds HUF 5,000)
• Penalties: Missing RTIR invoice reporting, prepayments, or tax returns can incur fixed fines (typically HUF 5,000–50,000 per infraction)
• Tip: Calendar reminders and bank standing orders are your best defense against penalties

10. Record-Keeping Requirements

While flat-rate taxation significantly reduces paperwork, you still need to maintain:

• A chronological revenue register (invoice number, date, client, amount, deemed cost rate)
• All issued invoices and receipts
• Bank statements related to your business

All records must be kept for at least 5 years.

Invoice Content & NAV Expectations

The Hungarian Tax Authority (NAV) has strict requirements for invoices. Every invoice you issue must include:

• Your full Hungarian business name, address, and tax number
• Client’s name and address (plus VAT number for B2B transactions)
• Invoice date and unique invoice number
• Detailed description of services/goods provided
• Net amount, VAT line (or “VAT exempt” if applicable), and total amount
• Payment method and due date

Real-time Invoice Reporting (RTIR): All invoices (regardless of amount) must be reported electronically to NAV within 5 days through the Online Invoice system. This is why using NAV-integrated invoicing software is strongly recommended.

11. Switching and Termination Rules

Opting Out Voluntarily:

You can switch from flat-rate taxation to standard business taxation by indicating this in your annual tax return (by May 20).

Automatic Termination:

Your eligibility automatically terminates if you:

• Exceed the relevant revenue cap
• Fail to issue proper invoices (and NAV imposes a fine)
• Miss tax or contribution payments

Mid-Year Termination & Final Filing:

If you cease átalányadózás (either voluntarily or by crossing a revenue cap) mid-year:

• You have 30 days to submit a final income declaration covering your átalányadózó period
• Use Form 24SZJA but tick the “KATA/átalányadózás megszűnése” box
• Report the actual prorated income for the period you were under flat-rate taxation
• For the remainder of the year, you’ll need to follow standard taxation rules

Re-entry Restrictions:

If you leave the flat-rate system (voluntarily or involuntarily), you cannot re-enter until the following calendar year, and you can only make one switch per year.

12. Practical Tips for Expats

Setting Up:

1. Obtain a tax number and register as an egyéni vállalkozó via the Webes Ügysegéd or ONYA online portal. While these systems are in Hungarian, browser translation tools can help, or consider getting assistance from an English-speaking accountant.
2. Set up a Hungarian bank account for business transactions and tax payments. Most major banks offer English-language services.
3. Choose invoicing software with NAV integration. Popular options include Billingo and Számlázz.hu, which support the mandatory real-time invoice reporting system (RTIR).

Ongoing Management:

1. Mark all tax deadlines in your calendar with reminders—the Hungarian tax authority is strict about deadlines.
2. Consider hiring an English-speaking accountant for at least your first year. They can help you navigate the Hungarian tax system and online portals.
3. Keep track of your revenue totals throughout the year to ensure you don’t accidentally exceed the caps.
4. For EU cross-border services, learn about the reverse-charge VAT mechanism, which may apply to your transactions.

De Minimis & Non-Business Grants

If you receive any government or EU grants:

• Small “de minimis” grants often don’t count toward your revenue cap
• Subsidies specifically designated for business development or cost coverage are typically excluded from your vállalkozói bevétel (entrepreneurial revenue)
• Always confirm the tax treatment of any grant with NAV or your accountant before assuming it’s exempt

13. Common Pitfalls to Avoid

• Underestimating social contributions: Many expats focus only on the personal income tax advantages without accounting for the mandatory social contribution minimum thresholds.
• Misunderstanding revenue caps: Remember that these are prorated if you start mid-year.
• Language barriers with tax forms: NAV forms are primarily in Hungarian, which can be challenging for non-speakers.
• Missing real-time invoice reporting deadlines: All invoices must be reported electronically to NAV, and late filings can incur penalties.

14. Is Flat-Rate Taxation Right for You?

Flat-rate taxation is particularly well-suited for:

• New entrepreneurs with straightforward business models
• Freelancers and consultants providing knowledge-based services
• Small retail businesses with relatively low overhead costs
• Part-time entrepreneurs with another main income source
• Anyone who values simplicity over maximizing deductions

However, it might not be ideal if your business has:

• Very high actual expenses that exceed the deemed cost percentages
• Annual revenue approaching or exceeding the caps
• Complex international operations

If you’re uncertain whether flat-rate taxation is the right choice for your specific situation, consider consulting with a tax professional who specializes in expat taxation in Hungary.

Glossary of Hungarian Tax Terms

Hungarian Term	English Explanation
Átalányadózás	Flat-rate taxation system for sole proprietors
ÁNYK	General Form Filler Application – older tax form software
ÁSZF	General Terms and Conditions (required for businesses)
Egyéni vállalkozó	Sole proprietor/individual entrepreneur
HIPA	Local business tax collected by municipalities
Iparűzési adó	Business activity tax (another name for HIPA)
NAV	National Tax and Customs Administration
ONYA	Online Form Filling Application (newer tax portal)
ÖVTJ kód	Activity code classification for entrepreneurs
RTIR	Real-time Invoice Reporting system
Szocho	Social contribution tax (13% in 2025)
TB járulék	Social insurance contribution (18.5% in 2025)
Ügyfélkapu	Client Gateway – central government portal for e-services

Frequently Asked Questions

English-Language Resources for Expats

While most Hungarian tax information is primarily available in Hungarian, there are resources to help English-speaking entrepreneurs:

• NAV English Portal: The Hungarian Tax Authority offers some English-language guidance on their website at nav.gov.hu/english
• Expat Forums: Groups like “Expats in Budapest” on Facebook can be valuable for peer Q&A about navigating NAV procedures
• Online Translation Tools: Browser extensions that automatically translate Hungarian websites can help you navigate NAV’s online portals

Need Help?

Navigating Hungarian taxation as an expat can be challenging, especially with language barriers. If you’d like personalized assistance or have specific questions about your situation, feel free to contact our Hungary tax experts. We can connect you with English-speaking accountants who specialize in helping expats manage their tax obligations efficiently.

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This guide is based on tax regulations effective as of January 2025. While we strive for accuracy, tax laws can change, and your specific circumstances may require personalized advice. Always consult with a qualified tax professional before making important financial decisions.