Small taxpayers’ itemized tax ("KATA") – 2021

Fom January 1, 2021, the KATA regulations have changed significantly. By paying the tax, the company is still exempt from the obligation of pazicorporate tax, personal income tax, social contribution tax, social security contribution and vocational training contribution.

The subjects of KATA can be sole proprietors, sole proprietorships, law firms, as well as, among companies, public limited companies and limited liability companies with only private members.

As of January 2021, the legal relationship of a KATA tax payer can be
only chosen in one business capacity, no one can be a multiple KATA taxpayer, so can not be also a sole proprietor and a member of a KATA taxpayer company at the same time.

The small taxpayer pays a monthly itemized tax of HUF 50,000 (or, at its option, 75,000 due to the option to apply for a higher social security benefit fund) for an individual declared as a full-time taxpayer. The small taxpayer pays a monthly tax of HUF 25,000 per declared taxpayer who does not qualify as a full-time employee (eg who has an employment relationship of 36 hours or more per week, is an old-age pensioner, is considered to be insured abroad, does not have additional activities in another enterprise).

An additional 40% extra tax liability arises if one of the following conditions is met:

  • in case of exceeding the aggregate amount of HUF 3 million of issued invoices to one (unrelated) partner per year,
  • between affiliated companies, regardless of the value threshold,
  • over HUF 12 million per year.

In the first two cases, the extra tax is paid by the recipient of the invoice, unless the payer is a foreigner company in which case the entrepreneur must meet the tax liability. In the third case, the low-tax entrepreneur is subject to a 40% tax liability.

The itemized tax must be paid monthly by the 12th day of the month following the relevant month. By 25 February of the year following the tax year, the enterprise shall make a declaration equivalent to the return on its income as a taxable person in the tax year.