KATA vs. Flat-Rate vs. Itemised – Which Leaves You More Money in 2026?
If you run a sole proprietorship (egyéni vállalkozás) in Hungary — whether as a Hungarian citizen or a foreign national with a residence permit — you generally choose between three tax regimes, and the decision can easily mean a difference of several million forints a year. This guide walks through all three under the 2026 rules, with real revenue scenarios, showing which one leaves the most money in your pocket — and why the answer isn't always the same.
Updated:
- Who can choose KATA in 2026: In 2026, KATA is only available to full-time sole traders who invoice exclusively private individuals (not companies), with annual revenue not exceeding 18 million…
- What is the flat-rate tax cost ratio in 2026: The general cost ratio rose from 40% to 45% in 2026. Certain manual trades have an 80% ratio, and retail has a 90% ratio.
- When does itemised (entrepreneurial PIT) taxation pay off: When your actual, documented costs are higher than what the flat-rate cost ratio would recognise, or when you have significant investments or equipment purchases…
Work it out for your own situation: Open the Business Taxation Comparison tool – free, no registration required.
The three tax regimes in a nutshell
| Regime | How it works | Best for |
|---|---|---|
| KATA | Flat 50,000 HUF/month (full-time), almost independent of revenue up to 18M HUF | Low-cost sole traders serving private individuals |
| Flat-rate tax | A fixed percentage of revenue is automatically recognised as cost | Those whose real costs are lower than the recognised ratio |
| Itemised (entrepreneurial PIT) | You deduct your actual, documented costs from revenue | High-cost, investment-heavy businesses with proper documentation |
The right answer always depends on your specific revenue and real costs — which is exactly why our calculator computes all three regimes for you at once.
KATA 2026: who benefits, and what are the limits?
KATA (the lump-sum tax for small businesses) is the simplest regime: as a full-time sole trader you pay a flat 50,000 HUF per month, which covers personal income tax, social security contributions, and the social contribution tax all in one. Under the 2026 rules, however, strict limits apply:
- Only available to full-time sole traders invoicing private individuals — you cannot invoice companies or other businesses under KATA.
- Annual revenue cannot exceed 18 million HUF; revenue above that is subject to a 40% surtax.
- Part-time entrepreneurs cannot choose it at all. If you have employment of 36+ hours a week, you cannot be a KATA taxpayer – the old HUF 25,000 part-time KATA was abolished in September 2022. In that case your options are flat-rate or itemised taxation.
Flat-rate tax 2026: the 45% cost ratio
Under flat-rate taxation, instead of your actual costs, the system automatically deducts a statutory cost ratio from your revenue — for most service, consulting and IT activities this ratio is 45% in 2026 (up from 40%). Certain manual trades (construction, hairdressing, catering) get 80%, and retail gets 90%.
Part of the remaining income — half the annual minimum wage, 1,936,800 HUF in 2026 — is tax-free. Only the amount above that is subject to 15% PIT, plus social security and social contribution tax.
Itemised (entrepreneurial PIT) 2026: when real costs matter
Under itemised taxation, you deduct the actual, invoice-documented costs from your revenue — there's no automatic percentage. The remaining business profit is taxed at 9% entrepreneurial PIT, after which the after-tax profit can be drawn as a dividend, which carries a further 15% PIT and (up to a cap) 13% social contribution tax.
This regime pays off when your business has substantial, documentable expenses: office rent, employee wages, expensive equipment, machinery, raw materials. In that case, deducting your real costs can be far more favourable than a fixed percentage ratio.
Real comparison: 12 million HUF annual revenue
Let's look at a full-time IT consultant with 12 million HUF annual revenue, 3 million HUF in documented real costs (laptop, software, internet, travel), in the 45% flat-rate category:
| Tax regime | Annual net result | Effective burden |
|---|---|---|
| KATA | ~11,400,000 HUF | ~5% |
| Flat-rate (45%) | ~9,220,000 HUF | ~23% |
| Itemised (entrepr. PIT) | ~5,950,000 HUF | ~50% |
For this specific profile — low cost, high revenue, full-time trader invoicing private individuals — KATA is clearly the best choice. But if this consultant invoiced companies instead, KATA wouldn't be an option at all, and the choice would come down to flat-rate vs. itemised based on real costs.
Compare with your own numbers
Our calculator uses your revenue, costs and cost ratio to compute the net result of all three tax regimes at once, and shows you which one works best for you.
Open the Business Taxation Comparison tool →Another profile: high-cost, lower-revenue business
Let's look at a different typical case: a craft-based sole trader with 6 million HUF annual revenue but 1 million HUF in documented material costs, in the 45% flat-rate category, full-time:
| Tax regime | Annual net result |
|---|---|
| KATA | ~5,400,000 HUF |
| Flat-rate (45%) | ~4,575,000 HUF |
| Itemised (entrepr. PIT) | ~3,276,000 HUF |
Here too KATA remains the best choice — this isn't a coincidence: as long as revenue is under the 18M cap and the trader invoices only private individuals, KATA is almost always the cheapest option, since the flat fee is proportionally small relative to revenue. Itemised taxation only pulls ahead when costs are very high (e.g. 60-70% of revenue) or when you invoice companies, where KATA isn't an option to begin with.
VAT considerations you shouldn't ignore
The choice isn't just about income tax. In 2026 the VAT exemption threshold rose to 20 million HUF (gradually rising to 24 million over the following years). If your revenue is near this level, it's worth planning ahead, since becoming VAT-liable brings administrative burden and pricing considerations too — especially if you invoice private individuals who cannot reclaim VAT. We cover the detailed conditions – what happens when you cross the threshold and how to register – separately in the VAT exemption threshold 2026 article.
Another administrative change affects entrepreneurs too: from 1 September 2026, receipt data reporting becomes mandatory, affecting roughly 270,000 businesses. If you issue receipts, it's worth reviewing this in good time, since it applies regardless of which tax regime you choose.
When KATA isn't an option, what's left?
For many entrepreneurs KATA falls out of the running because they also invoice companies or other businesses — this has been a disqualifying factor since 2022. In that case, the real decision is between flat-rate and itemised, and the key question is simple: do your actual, documentable costs exceed the applicable cost ratio (45/80/90%)?
- If no (your real costs are lower) → flat-rate tax is better, since you get "free" extra recognised cost.
- If yes (significant equipment, materials, subcontractor costs) → itemised taxation lets you deduct your full real costs, resulting in a lower taxable base.
Frequently asked questions
Can I switch tax regimes mid-year?
Generally, the choice of tax regime applies from the start of the tax year (or the date you start your business). Switching mid-year is only possible in exceptional cases with specific deadlines — it's worth consulting an accountant about the exact rules.
Can I combine KATA with other income?
Yes, having another legal relationship (e.g. employment) doesn't exclude KATA, but the conditions for "full-time" status (weekly working hours, insurance relationship) need to be checked carefully.
What happens if I exceed the 18M KATA threshold during the year?
Revenue above 18 million HUF is subject to a 40% surtax, but you can still remain on KATA for that year — though it's worth reconsidering your tax regime for the following year.