Hungary to overhaul KATA: new flat-rate tax for individual entrepreneurs from 2027

Hungary is proposing to overhaul the flat-rate tax for individual entrepreneurs (KATA) to replace the current KATA regime introduced in 2022. Unlike the current KATA, the new regime would also cover revenue from businesses, but a 40% special tax would apply to annual revenue above HUF 22 million, and a new supplementary tax would target B2B revenues. The current KATA would be closed to new entrants from 2027 and its tax increased. Entrepreneurs could opt for the new regime from 1 December 2026 with the new rules applying from 1 January 2027.

Eligibility and opting in

The new regime would be open to full-time individual entrepreneurs and to self-employed workers employed at least 36 hours a week, self-employed pensioners and partners in another business who are insured or self-employed while insured abroad. Those whose tax number was deleted in the year of opting in or the preceding 12 months, or is under deletion, would be excluded along with individuals with real estate rental revenue (activity code 68.20) that year. 

Additionally, as preventative measures against bogus employment, KATA status would end if the taxpayer earned income from their employer, from a former employer within 24 months after the employment ends, or from a legal successor or related company of either. Status would also end at the close of the tax year if income from a single company and its related companies reaches 50% of the taxpayer's total annual KATA income, so that companies cannot use KATA contractors as disguised employees in place of an employment relationship. 

The current KATA closes to new entrants after 31 December 2026, and the 2022 Act will be repealed from 1 January 2029. Remaining taxpayers move into the new regime automatically as full-time taxpayers unless they opt out by 31 December 2028.

Tax amounts and insurance

The proposed flat tax amounts are the following:

• For 2027: HUF 100,000 (EUR 275) per month for full-time taxpayers and HUF 50,000 (EUR 140) for others, such as employees working at least 36 hours a week or students;
• From 2028: both amounts would be linked to the minimum wage;
• For 2027 and 2028: with special HUF 75,000 and HUF 100,000 rates respectively for current active KATA taxpayers. 

Payment of the flat-rate tax would discharge personal income tax, social security contributions and social contribution tax on the entrepreneur's own income. Only full-time taxpayers would be insured, on a base of HUF 317,000 in 2027.

Special tax and supplementary tax

Income from businesses would be expressly permitted under the new KATA regime. Notwithstanding, under the draft, a supplementary tax would be payable if, in a given year, 15% of the income received from companies exceeds the total flat-rate KATA amount payable for that year. In practice, for 2027 and for full-time taxpayers the B2B benchmark would be HUF 8 million (EUR 22,000) with the supplementary tax of 15% payable on the surplus.

 A 40% special tax would apply to annual revenue above HUF 22 million, prorated for part-year status. Both amounts would be due by 25 February of the following year.

B2B revenue would count towards HUF 22 million cap, and no supplementary tax applies to revenue above the cap, so the same revenue would not be taxed twice.

Recommended next steps

Although the final text may change, affected parties should start assessing their position now. Current KATA taxpayers should model the 2027 and 2028 increases, and clients should review contracting structures involving former employers, related companies and intermediaries. 

For more information on the new KATA regime in Hungary and the practical implications thereof, contact your CMS client partner or the CMS experts who wrote this article.

The article was co-authored by Botond Nagy.