KATA Explained: Who Can Still Use It in 2026

What is KATA and who can still use it in 2026?

The short answer: KATA (the itemised tax for small taxpayers, in Hungarian kisadozok teteles adoja) is a simplified flat tax where an eligible sole proprietor pays a fixed HUF 50,000 a month and is exempt from separate personal income tax, social security contributions and social contribution tax on that activity. As of 2026 it stays one of the simplest regimes in Hungary, yet also one of the most restricted, so the honest answer to who can still use it is a narrow group.

Since the reform that took effect on 1 September 2022, KATA is governed by the Small Taxpayers' Itemised Lump-Sum Tax Act (Act XIII of 2022). The current rules limit it to full-time sole proprietors who serve private individuals, which shuts out most freelancers who invoice companies. The monthly amount, the income ceiling and the eligibility test are all set out in the official NAV information booklet on the regime (source).

Who is eligible for KATA in 2026?

KATA is open only to a self-employed person whose main occupation is registered as a sole proprietor (egyeni vallalkozo, sole proprietor) under the Hungarian sole traders act (source). Main occupation is the operative phrase: the regime is built for people whose self-employment is their primary activity, not a side project.

You are not treated as having self-employment as your main occupation, and therefore cannot choose KATA, if on every day of the reference month you fall into one of several categories, including:

• you are in an employment relationship of at least 36 hours a week (concurrent jobs are added together)
• you are a pensioner receiving an old-age pension in your own right
• you are insured abroad under EU social security coordination rules or a bilateral agreement
• you are in full-time education at a school or university in the EEA or Switzerland

Two further exclusions matter. A sole proprietor whose tax number has been cancelled by the tax authority in the year of filing or the preceding 12 months cannot opt in, and anyone earning income from letting or operating real estate (activity code 68.20) is shut out of KATA entirely (source).

Why most expats and B2B freelancers cannot use KATA

The single rule that surprises most newcomers is the ban on invoicing companies. A KATA taxpayer may earn income from private individuals, but the moment income arrives from a payer (kifizeto, a legal entity or other organisation), including a foreign company, KATA status ends. The only carve-out is passenger transport by taxi (source).

This is why the popular belief that KATA is the go-to low-tax setup for expat freelancers in Budapest is now a myth. A remote developer billing a foreign client, a consultant working for agencies, or a designer invoicing Hungarian businesses cannot legally sit under KATA. The 2022 reform was aimed precisely at ending the practice of companies replacing employees with KATA contractors.

Before September 2022 the regime was far broader: the annual revenue ceiling had just been raised from HUF 12 million to HUF 18 million, and roughly 450,000 entrepreneurs used it (source). The narrowing was abrupt, and by one economic institute's account it led to the closure of about 35,000 KATA businesses (source).

How much tax do you pay under KATA?

For those who do qualify, the maths is simple. The itemised tax is HUF 50,000 a month (roughly 125 EUR), payable by the 12th day of the following month, and it cannot be prorated for part of a month (source). That single payment settles personal income tax, the taxpayer's own social security contributions and the social contribution tax on the KATA activity.

There is a ceiling. Annual income up to HUF 18 million (roughly 45,000 EUR) is covered by the flat monthly tax (source). On the part of income above HUF 18 million in a calendar year, a special tax of 40% applies to the excess. If KATA status does not run for the full year, the limit is prorated at one twelfth of HUF 18 million, that is HUF 1.5 million, for each active month (source).

A worked example from NAV makes it concrete: a sole proprietor on KATA from 1 March who earns HUF 17 million by year end has an effective limit of HUF 15 million (10 months at HUF 1.5 million), so the 40% special tax falls on HUF 2 million of income (source).

What KATA covers and what it does not

KATA is not only a tax, it also provides social insurance. A KATA taxpayer counts as an insured person for the whole period of the status and can build entitlement to a pension and to other social security and job-seeker benefits. Those benefits, however, are calculated from a modest basis of HUF 108,000 a month (source), well below an average Budapest salary, so pension and sick-pay accrual is correspondingly low.

For income accounting, only 60% of the KATA taxpayer's declared income is treated as income, for instance when a bank assesses borrowing capacity, the rest counting as deemed costs (source). The regime also carries light record-keeping, a simple revenue ledger rather than full double-entry books, which is a large part of its appeal for the small businesses that still qualify.

How do you register for KATA, and how does it end?

Registering runs through the tax authority, not the company court, because a KATA taxpayer is a sole proprietor rather than a company. Someone starting self-employment can elect KATA at the same time as registering with NAV, while an already active sole proprietor files the T101E declaration form, most easily through the ONYA online form application (source). Any change to the declared data must be reported within 15 days.

Ending KATA deserves attention. Status can cease automatically, for example when income arrives from a company, or by the taxpayer's own notice. One rule catches people out: for the year of termination and the following 12 months, KATA cannot be chosen again (source). Switching out is therefore not a decision to take lightly, and it is worth confirming the timing with an accountant before you act.

Is KATA coming back in its old form? The 2027 debate

KATA is a politically charged topic, and 2026 headlines announcing that it is coming back need a careful read. On 1 June 2026 the finance minister signalled that the government intends to restore broad access to KATA from 2027, with a final draft of the legislation expected around the turn of 2026 and 2027 (source).

The important nuance is in that same institute's own title: KATA is back, but not the same. Any restored regime is expected to include anti-abuse safeguards to stop companies disguising employment as contracting, the very practice the 2022 reform targeted. The estimate is that a wider KATA could affect 300,000 to 350,000 entrepreneurs (source). None of this is law yet, so for 2026 the restricted rules above are what apply, and any 2027 change should be treated as subject to change until it is enacted.

What can you use instead of KATA?

If you cannot qualify for KATA, which is the case for most people invoicing businesses or foreign clients, Hungary still offers competitive options. The two most common alternatives for individuals are:

• Flat-rate taxation (atalanyado, flat-rate tax): a sole proprietor regime where a fixed share of revenue is deemed to be cost, and the remaining profit is taxed at the standard 15% personal income tax plus contributions. Crucially it permits invoicing companies, unlike KATA.
• A limited company (Kft, limited liability company): forming a Kft lets you invoice any client and benefit from the 9% corporate tax, the lowest headline rate in the EU (source), at the cost of more administration.

Which route wins depends on your clients, your margins and how much paperwork you want to carry. It is worth comparing the Kft, Bt and sole trader options side by side, reading the steps for registering a Kft, and understanding how Hungarian VAT applies once you invoice, before committing. For the wider picture, see the hub on starting a business in Hungary. Because tax status shapes your social security, pension and liability, a Hungarian accountant or tax adviser is the right person to confirm the best fit for your situation.

Frequently asked questions

Can I use KATA if I invoice foreign clients or companies?

No. Income from any payer that is a legal entity, including a foreign company, ends KATA status, because a KATA taxpayer may bill only private individuals. Passenger transport by taxi is the sole exception, so most B2B and remote freelancers have to use a different regime such as flat-rate taxation or a company.

How much is KATA per month in 2026?

The itemised tax is a flat HUF 50,000 a month (roughly 125 EUR), which covers personal income tax and the taxpayer's own contributions on that activity up to HUF 18 million of annual income. Income above HUF 18 million in a calendar year carries a 40% special tax on the excess.

Can employees with a full-time job also use KATA?

No. Anyone in an employment relationship of at least 36 hours a week, with concurrent jobs added together, is not treated as a full-time sole proprietor and cannot choose KATA. The regime is reserved for people whose self-employment is their main occupation.

Is KATA coming back in 2027?

The government signalled in June 2026 that it intends to widen access to KATA from 2027, with draft legislation expected around the turn of 2026 and 2027. It is not yet law and is expected to carry anti-abuse safeguards, so it should be treated as a plan that is subject to change rather than a current option.

What is the best alternative to KATA for a freelancer?

For sole proprietors who invoice companies, flat-rate taxation (atalanyado) is the usual first choice, since it allows business clients and taxes profit at the 15% personal income tax. Those planning to grow or work with larger clients often form a Kft to invoice freely and use the 9% corporate tax.