The Hungarian Government is planning significant changes to the simplified fixed-rate tax regime for small taxpayers (KATA) from 2027. One of the most important proposals, published for public consultation on 6 October 2026, would allow individual entrepreneurs to invoice companies and other organisations again.
However, the proposed regime would also introduce restrictions that both entrepreneurs and their corporate clients should carefully consider.
What Are the Main Proposed Changes?
The draft legislation would substantially expand eligibility for the KATA regime. Under the proposal:
- Full-time individual entrepreneurs would pay a fixed monthly tax of HUF 100,000.
- Part-time entrepreneurs would also become eligible, subject to a monthly tax of HUF 50,000.
- The annual revenue threshold would increase to HUF 22 million, with a 40% additional tax on revenue exceeding that threshold.
- Invoicing companies and other organisations would once again be permitted.
These changes could be particularly relevant to service providers and professionals working with corporate clients.
Corporate Invoicing Would Remain Subject to Restrictions
Under the proposal, revenue received from companies and other qualifying payers would be subject to a 15% tax, against which the fixed KATA payments due for the relevant year could be credited.
For a full-time entrepreneur operating under KATA throughout the year, the annual fixed tax of HUF 1.2 million would cover the 15% tax on corporate revenue up to HUF 8 million. Additional tax could become payable above that amount, depending on the applicable conditions.
A particularly important restriction would apply where at least 50% of an entrepreneur’s annual revenue comes from the same payer or its related entities. In such circumstances, KATA eligibility would terminate at the end of the tax year.
This could have significant consequences for entrepreneurs who work predominantly for a single corporate client.
What Should Corporate Clients Consider?
The proposed reintroduction of corporate invoicing under KATA could make cooperation with individual entrepreneurs more attractive.
Nevertheless, the applicable tax regime does not, in itself, determine whether a contractual relationship qualifies as an employment relationship under Hungarian labour law.
Regardless of the title of the agreement or the method of invoicing, the actual circumstances of the engagement remain relevant. These may include the entrepreneur’s independence, the degree of control exercised by the client, the organisation of work and the allocation of commercial risks.
Companies should therefore continue to ensure that their service and contractor agreements accurately reflect the parties’ actual working relationship.
What Happens to Existing KATA Taxpayers?
The draft also includes transitional provisions for entrepreneurs already subject to the current KATA regime on 31 December 2026.
Subject to the applicable conditions, they could continue using the existing regime during 2027 and 2028.
When considering the available options, entrepreneurs should assess not only the monthly tax payments but also their expected revenue, client structure and the basis for social security benefits.
When Could the New Rules Enter into Force?
The main substantive changes are proposed to apply from 1 January 2027.
As of the publication of this article, the legislation remains a draft and may be amended before adoption.
SWK Law Firm recommends that entrepreneurs and corporate clients assess the potential tax implications alongside their existing contractual arrangements and the actual circumstances in which services are provided.