New KATA rules from 2027: what does the draft legislation contain?

On 6 October 2026, the draft of a new act on the itemised tax of small-taxpayer sole proprietors was published. The proposal aims to make KATA available again to a broader range of entrepreneurs, rather than offering a favourable tax option only to full-time sole proprietors who invoice private individuals.

It is important to note that the provisions described in this article are based on the published draft legislation and should therefore be treated as proposals until the final legislation is adopted.

Who could opt for the new KATA?

Since the restrictions introduced in 2022, a significantly narrower group has been eligible to opt for KATA. The new rules would broaden this group and once again allow several entrepreneurs who were previously unable to choose this form of taxation to do so.

Under the draft, the new KATA could be chosen, among others, by:

• entrepreneurs who also have employment of at least 36 hours per week;
• retired sole proprietors;
• full-time university students;
• full-time sole proprietors who meet the statutory conditions.

The change may be particularly relevant to those who currently apply flat-rate taxation or taxation based on entrepreneurial income because of the existing rules, but for whom the new KATA could offer a more favourable solution based on their activities and revenues.

Invoicing companies could be possible again

One of the most significant changes is that taxpayers opting for the new KATA would once again be allowed to invoice payers, including companies and other organisations.

This would be a material departure from the rules applied since 2022, which, as a general rule, exclude taxpayers from KATA if they receive consideration for their business activities from a payer.

According to the draft, supplementary tax would also be payable on revenue from companies if 15% of that revenue exceeds the amount of itemised tax payable for the year. In that case, the entrepreneur would have to pay the difference between the two amounts. This does not mean that a 15% tax would automatically be payable on the full amount of company revenue: the supplementary tax would only be the portion exceeding the annual itemised tax.

Example

A full-time small taxpayer operating throughout 2027 would pay itemised tax of HUF 100,000 per month, or HUF 1.2 million annually. If the taxpayer earned HUF 10 million from payers during the year, the calculated 15% tax would be HUF 1.5 million. The supplementary tax would therefore amount to HUF 300,000.

Limits on invoicing companies

However, the possibility of invoicing companies would not mean unrestricted freedom. To mitigate the risk of disguised employment, the draft provides for KATA taxpayer status to terminate in certain cases.

If at least 50% of the entrepreneur’s annual revenue comes from the same payer or from enterprises affiliated with that payer, KATA taxpayer status would terminate on the last day of the year.

A separate rule would also apply to revenue from a current or former employer. Under the draft, revenue from an employer, from a former employer within 24 months after termination of employment, or from specified affiliated enterprises could result in the termination of KATA taxpayer status.

The annual revenue threshold would increase to HUF 22 million

According to the draft, the annual revenue threshold under the new KATA would increase from HUF 18 million to HUF 22 million for taxpayers operating for the full year.

Exceeding the threshold would not, however, automatically terminate KATA taxpayer status. Under the draft, a 40% special tax would be payable on the portion of revenue exceeding HUF 22 million.

This means that exceeding the revenue threshold would create an additional tax liability, while KATA taxpayer status could remain in place if the entrepreneur otherwise meets the statutory conditions.

It is also important that the HUF 22 million threshold and the threshold for VAT exemption are governed by two separate sets of rules. Choosing KATA does not in itself ensure VAT exemption, so VAT liability must be assessed separately.

How would the monthly itemised tax change?

The draft would also amend the amount of the monthly itemised tax. In 2027, full-time small taxpayers would pay HUF 100,000 per month, while non-full-time small taxpayers would pay HUF 50,000 per month.

From 2028, the tax for full-time small taxpayers would be determined as 31.5% of the minimum wage in force on 1 January of the previous year (18.5% social security contribution and 13% social contribution tax), while for non-full-time small taxpayers it would be determined as 15% of the same minimum wage (personal income tax). In both cases, the amount calculated would be rounded to the nearest thousand forints.

What would happen to social security benefits?

The draft distinguishes between the social security position of full-time and non-full-time small taxpayers.

A full-time small taxpayer would qualify as insured and, under the draft, would also acquire entitlements related to social security and unemployment benefits. The monthly assessment base for benefits would be HUF 317,000 in 2027 and the minimum wage for the relevant year from 2028.

For non-full-time small taxpayers, however, payment of KATA alone would not result in insured status. This is particularly relevant for entrepreneurs who also have employment and for pensioners, as the social security consequences, in addition to the tax burden, should be considered when choosing the form of taxation.

What will happen to the current KATA?

An important feature of the change is that the draft provides for a transitional period.

Entrepreneurs taxed under the current KATA rules on 31 December 2026 could remain in the old system until 31 December 2028. For them, the itemised tax would be HUF 75,000 per month in 2027 and HUF 100,000 per month in 2028.

Entrepreneurs wishing to be taxed under the new KATA rules could, under the draft, notify their choice from 1 December 2026, with the new taxpayer status commencing on 1 January 2027.

The current and new systems would therefore operate in parallel for a transitional period, after which the old KATA would cease at the end of 2028.

Once the final legislation has been published, entrepreneurs should therefore examine whether remaining in the old system or opting for the new KATA would be the more favourable solution.

What should be considered before the change?

The proposed rules would significantly broaden access to KATA, but the new system would not automatically provide more favourable taxation for every business.

Before making a decision, the following factors should be examined in particular:

• whether the entrepreneur has full-time or non-full-time status;
• the expected proportion of revenue from private individuals and payers;
• whether the HUF 22 million annual threshold is expected to be exceeded;
• the potential impact of the supplementary tax and the 40% special tax;
• VAT liability and other tax rules;
• social security entitlements;
• the conditions for switching between the old and new KATA.

Only once the final rules are known will it be possible to assess precisely which groups of entrepreneurs would genuinely benefit from the new KATA and when another form of taxation may be preferable.

Summary

The planned transformation of KATA could open up simplified taxation to a broader range of small businesses. Entrepreneurs working alongside employment and pensioners could also choose the tax, invoicing companies would again become possible, and the annual revenue threshold would increase to HUF 22 million.

The new rules could make KATA available to more entrepreneurs, but the supplementary tax linked to company revenue and the annual revenue threshold would continue to affect who would benefit from choosing this form of taxation. Before making a decision, it is therefore advisable to examine the business’s individual circumstances and expected tax burden.

ABT’s experts are monitoring the legislative changes. If you need assistance in interpreting the proposed rules or choosing the appropriate form of taxation for your business, our tax advisers will be pleased to assist you.