tag: small taxes

The September amendment to the KATA Act has fundamentally restricted this form of taxation. According to current estimates, only 100,000 of the 460,000 KATA-paying entrepreneurs will continue to be able to stay in the system, the rest will be squeezed out. Meanwhile, the amendment affects not only those subject to KATA, but also those who employ them. Below is a hand-picked selection of these effects.

While there were still as many as 60 types of tax in Hungary five years ago, this number was reduced to 54 by the end of last year. This process was interrupted by the recent introduction of crisis taxes. It remains to be seen whether this trend will now be reversed.

While dozens of programmers, engineers and hairdressers continue to opt for KATA [the fixed-rate tax for enterprises categorised as “small taxpayers”] in Hungary, the tax is increasingly coming under fire from all sides. Apparently, the Hungarian Tax Authority (NAV) is stepping up its investigations into businesses who employ KATA payers, and at the same time rumours are also flying about a planned KATA tightening.

60, 59, 58, 55… this is how the number of taxes has changed in Hungary over the past 4 years. The trend is certainly encouraging, but behind the figures there are some more complex phenomena at play.

The popularity of simplified, or “small” business taxes (KATA, KIVA) grows unabated, with thousands of engineers, computer programmers, hairdressers and lawyers opting for one or other of these schemes. Meanwhile, few are fully aware of the risks that these types of tax can entail. The potential consequences are measurable in hard tax forints and penalties, both for payers of these forms of tax and for the businesses that provide their income.