In early October, a long-awaited, sweeping overhaul of the domestic tax environment was announced: the draft bill for the new KATA (itemized tax for small-scale sole proprietors) was released for public consultation. The concept, which is currently only in the proposal phase, would fundamentally reshape the operating environment for small business owners. The team of experts at Capybara Homes is closely monitoring these developments, as the reform slated for January 1, 2027, could have far-reaching consequences for service providers and subcontractors in the real estate and housing sectors.
New Rates and Expanded Limits
Under the draft legislation, starting in 2027, full-time small taxpayers can expect a flat-rate tax of 100,000 forints per month, while those with part-time employment can expect a flat-rate tax of 50,000 forints. The logic behind the classification remains the same as it is now: anyone who works more than 36 hours per week, is retired, or is enrolled in full-time studies will continue to be classified as having a part-time job. Policy makers would also raise the income cap from the current 18 million to 22 million forints per year. As an expert from Capybara Homes pointed out, this step could provide significant relief and growth potential for micro-enterprises operating at the limits of their capacity. An important change in terms of predictability is that, starting in 2028, the monthly tax liability would automatically be adjusted to the current minimum wage: 31.5 percent of the minimum wage for full-time employment and 15 percent for part-time employment, covering the burden of income tax, social security contributions, and employee contributions.
Business invoicing is making a comeback, but with new rules
The most significant paradigm shift is undoubtedly that the new regime would once again open the door to invoicing legal entities and companies. However, this concession comes at a price: income from corporate payers would be subject to a 15 percent surtax. At the same time, the system includes a built-in concession, as the amount of monthly flat-rate taxes paid in a given year can be deducted from this additional tax burden. In practical terms, this means that for a full-time entrepreneur, the annual base payment of 1.2 million forints provides full coverage for corporate income of up to approximately 8 million forints, while for a part-time entrepreneur, 4 million forints is the threshold up to which no additional payment obligation arises toward the tax authority.
Strict Measures Against Hidden Employment
To weed out abuses and hidden employment relationships, the draft bill introduces drastic safeguards. If more than 50 percent of a self-employed person’s annual income comes from a single payer (or its subsidiaries), their KATA status will automatically expire on the last day of the year, and the individual will be placed on a blacklist for the following twelve months. The penalty is even stricter if someone issues an invoice to a former employer who employed them during the current or previous 24 months: in such a situation, tax registration is revoked with immediate effect on the day before the income is received. In exchange for these concessions, administrative requirements are also increased: for each item of income, the payer’s details must be recorded along with their tax ID number, and the tax return must be filed by February 25 of the year following the tax year in question.
A Lifeline and a Transition Period for Those Currently in the System
Entrepreneurs who are still subject to the current KATA system on the last day of 2026 may remain under the protective umbrella of a transitional, so-called „old” scheme until the end of 2028, provided they do not request to be reclassified into the new system. For them, the tax burden would be 75,000 forints per month in 2027 and 100,000 forints in 2028, while retaining the familiar 18 million forint cap. However, there is a strict restriction: they will still not be allowed to issue invoices to companies; if they do so, they will immediately be excluded from this scheme. It should be noted that the preferential 75,000-forint bracket will be strictly reserved for long-time participants; newcomers can only start at the 100,000-forint rate.
Social Security and the Loopholes That Remain
From the perspective of pensions and social security, the new KATA system for full-time workers represents a major step in the right direction: the benefit base—which serves as the foundation—will jump from the much-criticized 108,000 forints to 317,000 forints per month in 2027, which will substantially improve future pension expectations. For those with part-time jobs, however, these contributions still do not generate social security eligibility.
Although the main pillars of the draft have already taken shape, countless technical details that require fine-tuning—such as the calculation of budget allocations for partial years, the exact algorithm for the supplementary tax on mixed income, or the precise definition of affiliated companies—are still shrouded in uncertainty. Until Parliament approves the final legislation following the conclusion of public consultations, the currently known, framework—allowing only retail transactions up to 50,000 forints per month—will remain the benchmark, and Capybara Homes’ experts are ready to provide reliable support to partners who turn to them as they navigate its daily complexities.