Hungary’s KATA Tax System: A Complete Guide for Small Taxpayers (2025 Edition)

What is KATA?

KATA is a simplified, flat-rate tax system that allows eligible small entrepreneurs in Hungary to pay a fixed monthly amount instead of dealing with multiple tax obligations separately. It’s designed to simplify administration and reduce the tax burden for small business owners—but comes with strict limitations on who can use it and how it works.

Who Can Apply for KATA?

KATA eligibility is narrowly defined. You must be:

• A self-employed sole proprietor registered under the Evectv (Act on Sole Proprietors)
• Pursuing this as your main occupation, which means:
  • Not employed full-time (over 36 hours/week) elsewhere
  • Not insured abroad through another system
  • Not participating in other business partnerships or auxiliary activities
• A Hungarian tax resident with a valid tax number
• Not earning income from companies or businesses (with one exception we’ll cover later)
• Not earning income from rental property as a business activity

Special cases where you might still qualify:

• Students in full-time education (up to age 25)
• Certain pensioners under specific conditions
• Non-full-time (auxiliary) option: If you already have full-time employment or other coverage, you can opt for the “nem főállású” (auxiliary) KATA at a reduced rate of HUF 25,000/month. Note that this comes with reduced social security benefits compared to the full-rate scheme.

Keep in mind that KATA’s eligibility requirements are strict by design. The tax system is meant for true solo entrepreneurs, not those working primarily with companies or as de facto employees.

When and How to Register for KATA

For New Entrepreneurs

If you’re just starting your business, you can select KATA during your initial registration with the National Tax and Customs Administration (NTCA). Your KATA status will be effective from your start date.

For Existing Entrepreneurs

Already running a business under a different tax system? You can switch to KATA during the year, and your new status will take effect on the first day of the following month after your application.

Registration Process

You can declare KATA status through:

• ONYA Portal: https://onva.nav.gov.hu
• Web Assistant (Ügysegéd): https://www.nyilvantarto.hu/ugyseged

Top tip: Before switching to KATA from another tax system, be sure you’ve properly settled all obligations under your previous tax regime and have a clear plan for separating pre- and post-KATA revenues.

Monthly Tax Obligations

Once you’re under KATA, your primary tax obligation is straightforward:

• HUF 50,000 per month flat tax payment (or HUF 25,000 for auxiliary KATA)
• Due by the 12th of each month
• Paid to the “Small Taxpayers’ Itemised Lump-Sum Tax Revenue Account” (10032000-01076349)

This single payment replaces multiple tax obligations, including:

• Personal income tax
• Social contributions
• Business tax (for the most part)

Late Payment Penalties

If you miss the payment deadline:

• NAV applies a daily late-payment interest (késedelmi pótlék) equal to the current MNB base rate + 5%, divided by 365
• This interest won’t be levied unless the total exceeds HUF 5,000
• Remember that tax debt over HUF 100,000 will terminate your KATA status

Exemption Periods

You can be exempt from the monthly payment only if:

• You earn absolutely no income during the entire month
• You submit a declaration stating this through the ONYA portal

Important note: Simply being on sick leave or traveling abroad doesn’t automatically exempt you—the key factor is that you must earn zero income during the month.

The 40% Additional Tax

KATA offers significant tax advantages for low and medium-income entrepreneurs. However, there’s a built-in mechanism to ensure higher earners contribute more:

• 40% additional tax applies to any income exceeding HUF 18 million per year
• For partial years, this limit is prorated (HUF 1.5 million per month of activity)
• Due by February 25th of the following year (or within 30 days if KATA status ends mid-year)
• Declared via the ONYA portal using the KATA form

How the 40% Tax is Calculated

Let’s break this down with an example:

If you earned HUF 20 million in a full year as a KATA taxpayer:

• Your limit is HUF 18 million
• The excess amount is HUF 2 million
• Your additional tax would be 40% of 2 million = HUF 800,000

If you were a KATA taxpayer for only 6 months:

• Your prorated limit would be HUF 9 million (1.5 million × 6 months)
• Any income above this amount would be subject to the 40% tax

When KATA Status Automatically Ends

Your KATA status will be automatically terminated if:

1. You earn any income from a company or business entity (“payer”), with one exception: taxi/passenger transport services (TESZOR 49.32.11)
2. You earn income from rental property as a business activity
3. You no longer meet the main occupation criteria (e.g., you take a full-time job)
4. You accrue over HUF 100,000 in tax debt
5. You fail to notify the tax authority about changes in your status within 15 days

The first point is particularly important: unlike many other tax systems, KATA is exclusively for entrepreneurs serving individual customers, not businesses. Receiving even HUF 1 from a company will immediately disqualify you from KATA (except for taxi drivers).

Re-entering KATA After Termination

If your KATA status ends for any reason:

• You cannot re-enter KATA during the same calendar year
• You may only apply again in the following year
• You can only do this once every 12 months

Record-Keeping Requirements

Even though KATA simplifies your tax payments, you still have record-keeping obligations:

• Maintain chronological income records showing:
  • Serial number
  • Document number (e.g., invoice number)
  • Income amount
  • Date income was received
• Keep records and invoices for 5 years
• Ensure your KATA tax number appears on all invoices

While KATA reduces paperwork, maintaining accurate records is essential—both for your annual declarations and in case of a tax audit.

Additional Compliance Requirements

VAT Registration and Thresholds

It’s important to understand that KATA and VAT are separate systems with different thresholds:

• The HUF 18 million KATA income limit is not the same as the VAT exemption threshold
• If your annual revenue exceeds HUF 12 million, you must register for VAT
• You’ll need to charge VAT on invoices above this amount
• Failure to register and comply with VAT rules carries its own penalties

Top tip: Don’t confuse KATA’s simplicity with exemption from other tax obligations like VAT. They operate independently, and you need to monitor both thresholds separately.

Real-Time Invoice Reporting

Since June 2021, all taxpayers (including KATA entrepreneurs) must:

• Submit invoice data electronically in real-time via the NAV Online Invoice (“RTIR”) system
• This applies to all invoices regardless of amount (the original HUF 100,000 VAT content threshold has been removed)
• Set up proper invoicing software that integrates with the RTIR system

This requirement exists alongside KATA and is mandatory regardless of your chosen tax regime.

Social Security and Benefits

One of KATA’s advantages is that it provides full social security coverage:

• You’re considered fully insured in Hungary
• Entitled to all standard benefits: pension, sick leave, jobseeker’s allowance, etc.
• Your social benefit base is calculated as HUF 108,000 per month

This means that while your tax obligation is simplified, you don’t sacrifice social security benefits.

Income Reporting and Deadlines

Annual Declaration

• Submit your annual income declaration by February 25th
• Report through the ONYA portal using the KATA form
• Include your total annual income

Mid-Year Termination

If your KATA status ends during the year:

• Submit a declaration within 30 days
• Report income earned during your KATA period

Foreign Currency Conversion

For income received in foreign currency:

• Convert to HUF using the Hungarian National Bank’s (MNB) official exchange rate on the date of receipt
• Include this converted amount in your records and declarations

Special Cases and Considerations

Agricultural Activities

If you combine agricultural work with other business activities under KATA:

• You must split costs proportionally between these activities
• Apply appropriate accounting methods to each segment

Deceased Taxpayer

The widow or heir of a deceased KATA taxpayer can:

• Continue KATA status within 90 days of death
• Must fulfill all the same eligibility requirements
• Needs to submit the necessary paperwork to the tax authority

Switching Between Tax Systems

When moving to or from KATA:

• Be mindful of how you treat previous or future income/expenses
• Account properly for stock inventories
• Adjust fixed asset records and depreciation calculations

Common Myths and Misconceptions

Despite what you might hear from agencies or see on YouTube channels, these requirements are NOT part of the official KATA regulations:

• There is no minimum savings requirement (e.g., €10,000)
• There are no specific foreign income restrictions beyond those already mentioned
• You do not need to have clients before applying
• There are no simplified exemptions beyond what’s officially stated

Always verify information with official government sources, as misinformation about KATA is unfortunately common.

Is KATA Right for You?

KATA offers significant advantages for true small entrepreneurs, including:

• Simplified administration
• Predictable tax costs
• Full social security coverage
• Lower overall tax burden for many

However, it’s not suitable for everyone. Consider these factors carefully:

• Do you work mainly with individual customers, not companies?
• Is your annual income likely to stay under or near HUF 18 million?
• Do you meet all the eligibility requirements without exceptions?
• Can you manage without income from rental property?

If you answered “no” to any of these questions, another tax system like Átalányadó might be more appropriate for your situation.

Final Steps Before Applying

Before committing to KATA:

1. Verify your eligibility through the official NTCA guidelines
2. Calculate your projected income to ensure KATA is financially beneficial
3. Plan your client structure to avoid working with companies
4. Set up proper bookkeeping systems to maintain required records
5. Contact our expert team for personalized guidance on navigating KATA’s requirements and avoiding common pitfalls

The KATA system can offer significant benefits when used correctly, but requires careful planning and adherence to its strict criteria.

---

This guide provides general information about the KATA tax system in Hungary based on regulations as of 2025. While we strive for accuracy, tax rules can change, and individual circumstances vary. For personalized advice, consult with a qualified tax professional.