Hungary's KATA Regime 2026: A Complete Guide for Italian Freelancers and Professionals
The KATA regime (Kisadózók Tételes Adója) is Hungary's flat-rate taxation system designed for self-employed individuals, freelancers, and small sole proprietorships. With a fixed monthly tax and simplified administrative management, it represents one of the most attractive tax options in Europe for professionals with low turnover.
However, the 2022-2023 reforms introduced significant restrictions that are crucial to understand before evaluating this regime. In this guide, you'll find everything you need to know about KATA in 2026.
What is the KATA regime?
KATA is a Hungarian flat-rate tax regime introduced in 2013 and modified several times. In its current version (2026), it provides for the payment of a fixed monthly tax in lieu of almost all other taxes and contributions, up to a certain annual turnover limit.
It applies to kisadózók (small taxpayers), i.e., individuals who carry out their own economic activity, without employees or with a minimal structure.
How KATA works in 2026
| Parameter | 2026 Value |
|---|---|
| Fixed monthly tax | 50,000 HUF (~125 EUR) |
| Annual turnover limit | 18,000,000 HUF (~45,000 EUR) |
| Tax on excess | 40% on the amount over the limit |
| VAT | Exemption up to the threshold |
| Social security contributions | Included in the fixed tax |
| Annual declaration | Simplified (NAV) |
With only 125 EUR per month in fixed tax, a freelancer with an annual turnover of 40,000 EUR pays approximately 1,500 EUR in total taxes — an effective rate of about 3.75%.
Post-2023 restrictions: what has changed
The July 2022 reform (effective September 2022) introduced the most important restriction: KATA is no longer applicable if the taxpayer predominantly invoices a single legal entity client (company).
In detail:
- If more than 50% of the turnover comes from a single corporate client, the excess income is taxed at 40%
- Individual clients are not subject to this restriction
- Foreign clients (non-Hungarian) are excluded from the restriction — a critical point for Italian freelancers with clients in Italy
- KATA remains fully applicable for those with diversified clients or foreign clients
⚠️ Practical implication: An Italian freelancer with a single Italian client (legal entity) does not incur the 40% restriction because the client is foreign. However, it is essential to verify your specific situation with a consultant.
Who can join the KATA regime
The following can join KATA:
- Individuals who carry out their own economic activity in Hungary
- Sole proprietors of Hungarian sole proprietorships (egyéni vállalkozó)
- Partners of certain simplified corporate forms
The following cannot join KATA:
- Capital companies (KFT, ZRT) — for these, the 9% flat tax applies
- Those with employees
- Those who carry out activities in certain regulated sectors
- Those who already have an employment relationship with the same employer
Advantages of the KATA regime
- Very low tax: ~125 EUR/month all-inclusive
- Simplified administration: no ordinary accounting, simple annual declaration
- Social security included: pension and health contributions are included in the fixed tax
- No VAT: VAT exemption up to the turnover threshold
- Flexibility: possibility to exit the regime at any time
Disadvantages and limitations
- Turnover limit: 45,000 EUR/year — above this threshold, KFT is more advantageous
- Single client restriction: penalizing for those with only one Hungarian corporate client
- Reduced pension: fixed contributions generate a very low Hungarian pension
- No cost deductibility: business costs are not deductible (tax on turnover, not profit)
- Residency required: to fully benefit from KATA, Hungarian tax residency is required
KATA vs. Italian flat-rate regime: comparison
| Parameter | KATA Hungary | Italian Flat-Rate |
|---|---|---|
| Effective tax rate | ~3-4% | 15% (5% for the first 5 years) |
| Turnover limit | ~45,000 EUR | 85,000 EUR |
| Social security contributions | Included in the fixed tax | Separate INPS (~25%) |
| VAT | Exempt | Exempt |
| Cost deductibility | No | Flat-rate (coefficient) |
| Residency required | Yes (Hungary) | Yes (Italy) |
| Estimated total burden | ~5-8% | ~30-35% (with INPS) |
KATA vs. KFT: when to choose which
| Scenario | Recommended choice |
|---|---|
| Turnover below 45,000 EUR, diversified clients | KATA |
| Turnover above 45,000 EUR | KFT |
| Single Hungarian corporate client | KFT |
| Foreign clients (Italian, European) | KATA (no restriction) |
| Need for high cost deductibility | KFT |
| Maximum administrative simplicity | KATA |
Learn more about the KFT structure in our guide on how to open a KFT in Hungary.
How to join the KATA regime in Hungary
- Obtain Hungarian tax residency — fundamental prerequisite (see our guide on tax residency)
- Register as an egyéni vállalkozó (individual entrepreneur) with NAV
- Communicate KATA membership at the time of registration or by January 31 of the fiscal year
- Pay the monthly tax by the 12th of each month
- Submit the simplified annual declaration by February 25 of the following year
Frequently Asked Questions about the KATA regime
Can I use KATA if I only have clients in Italy?
Yes. The 40% restriction only applies to Hungarian legal entity clients. Foreign clients (Italian, European) are not subject to the restriction, so you can invoice Italy freely without penalties.
Does KATA also cover pension contributions?
Yes, but it generates a very low Hungarian pension. The 50,000 HUF monthly includes a social security contribution, but the amount is insufficient for an adequate pension. It is advisable to supplement with private complementary pension schemes.
Can I switch from KATA to KFT at a later time?
Yes, it is possible at any time. Many entrepreneurs start with KATA to test the Hungarian market and then switch to KFT when their turnover exceeds the threshold or their needs change.
Is KATA compatible with the Italian flat-rate regime?
No. To benefit from KATA, Hungarian tax residency is required, which is incompatible with maintaining the Italian flat-rate regime. The two regimes are mutually exclusive.
How we can help you
Evaluating whether KATA or KFT is the right choice for your situation requires a personalized analysis. Elevate Advisory Group offers specific consultations for Italian freelancers and professionals who want to optimize their tax structure in Hungary.
Contact us for a free consultation. Or learn more by reading our guide on the Hungarian 9% flat tax to understand all the advantages of the Hungarian tax system.
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