What is kata?
There is a new amendment on Kata (https://nav.gov.hu/ado/kata), one of the most favorable flat-tax systems based on a fixed monthly amount of money to cover all your Hungarian tax obligations as a self-employed person.
The new law was voted on Tuesday July 12, in the House of Representatives in an exceptional procedure, and it will enter into force on 1 September 2022.
Why this change?
According to the Finance Ministry, this law will offer a simple and preferential tax regime for the smallest self-employed entrepreneurs, selling to the public. The law has been updated in order to avoid abuses.
Who will benefit from the new system?
Only self-employed persons will be taxed under KATA, and only full-time KATA taxpayers will be eligible, so those who may be in business while working or in the form of a Bt. will be excluded from the KATA option.
How has kata changed?
Only full-time self-employed entrepreneurs providing their own services and selling products to the public can opt for this form of taxation.
Threshold: from 12 million up to a higher annual income threshold of 18 million forints.
The tax rate: for all small entrepreneurs is HUF 50,000 per month. (The 25.000 for part time entrepreneurs is no longer an option, as there will be only the full-time option)
Clients: The new kata payers can only generate income from private individuals, with the exception of taxi drivers.
When will it enter into force?
The kata rules will enter into force on 1 September 2022, with declarations of election to be submitted to the tax office by 25 September at the latest.
The entrepreneurs who are not complaining with the new amendment, will have more time to make the changeover and can declare their choice of flat-rate tax (among other options) until 31 October 2022.
So…
Current kata-entrepreneurs have to evaluate what fiscal system is better for them. Many will probably have to talk with their current clients, partners and accountants in the upcoming summer weeks. New official info will be published on the NAV website, here the link to the Hungarian page: https://nav.gov.hu/ado/kata#tudnivalok
Our ITL Consulting experts remind you that the law still has to be formed by the President of the Republic, but invite you to explore all alternatives to KATA.
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