If you are a Hungarian freelancer who invoices companies, you have been locked out of the country's simplest tax regime for four years. Since September 2022, the KATA flat tax — one monthly payment, almost no paperwork — has been restricted to sole proprietors who sell only to private individuals. The moment a business client pays you, your KATA status ends by operation of law. Designers, developers, translators, consultants, and media freelancers with corporate clients were all pushed onto heavier, more expensive regimes overnight.
That may be about to change. Hungary's new government has signaled that the simplified KATA system will return, this time designed to be "abuse-proof" — open to freelancers who invoice businesses, but closed to the disguised-employment schemes that got the old system gutted. Nothing has been enacted yet, so treat this as a preview and a preparation guide, not a filing manual. Here is what KATA was, why it was taken away, what a revival would likely look like, and what to do with your books in the meantime.
What KATA Was — and Why 460,000 Businesses Used It
KATA, the Itemised Tax for Small Taxpayers, was Hungary's beloved small-business shortcut. Instead of computing personal income tax, social contributions, and corporate-style liabilities separately, a KATA taxpayer paid a flat monthly amount — 50,000 forints (roughly 125 euros) as the standard rate, with an optional higher 75,000-forint tier — and was done. No quarterly advance calculations, no expense substantiation, no accountant required for most users.
At its peak, around 460,000 businesses paid tax through KATA, including roughly 426,000 self-employed entrepreneurs. For a solo freelancer with a laptop and a handful of clients, it was close to the platonic ideal of small-business taxation: predictable, cheap, and nearly admin-free.
The old system even had a built-in anti-concentration mechanism. Revenue above a modest annual ceiling, and amounts above 3 million forints a year from a single domestic payer, attracted a punitive 40 percent levy. The message was clear: KATA was for genuinely independent small operators with diversified client bases, not for salary replacement.
Why Freelancers Lost It in September 2022
The 2022 reform was aimed at a real abuse: employers pushing their own workers into KATA status. A company could "fire" an employee on Friday, re-engage them as a KATA "contractor" on Monday doing the same job at the same desk, and both sides paid far less tax than a real employment relationship would have generated. The finance ministry said explicitly that the new rules were necessary because certain employers had forced employees into KATA status, damaging the budget, the workers, and honest taxpayers.
But the remedy was a blunt instrument. Under Act XIII of 2022, effective September 1, 2022:
- Only full-time sole proprietors can use KATA. Part-timers, side-hustlers, pensioners, and students are out.
- Only revenue from private individuals counts. With the single exception of taxi services, any revenue received from a business payer terminates KATA status automatically.
- The annual ceiling rose to 18 million forints (about 44,000 euros), up from 12 million — a bigger box, but one most B2B freelancers were no longer allowed inside.
The B2B ban was the killer. A translator whose clients are publishing houses, a developer billing two startups, a camera operator invoicing production companies — all of them became ineligible overnight, regardless of how genuine their independence was. Hundreds of thousands of freelancers were forced onto flat-rate taxation (átalányadó) or the standard entrepreneurial income regime, with higher effective rates and far more administration.
The Comeback Signal: What the New Government Has Said
After the 2026 change of government, the KATA revival moved from opposition talking point to official agenda. Incoming finance minister András Kármán said in May 2026 that the simplified KATA taxation system would return, noting that the earlier restrictions had hit freelancers and small businesses in the media sector particularly hard. The statement came as part of a broader tax-fairness agenda that also includes cutting personal income tax on the minimum wage to 9 percent.
Policy analysts are already sketching what a return could look like. The framing from the small-business community is consistent: bring back low flat payments and minimal red tape for genuine freelancers — including those who invoice businesses — but build the abuse detection in from the start rather than bolting it on after the damage. That is the "abuse-proof" concept in a sentence.
No bill text has been published as of this writing. Everything below about the revived design is informed inference from the old system's mechanics and the reform debate, not enacted law. Do not restructure your tax affairs around a press statement.
What "Abuse-Proof" Would Probably Mean in Practice
The 2022 reformers and the 2026 revivalists actually agree on the diagnosis: the enemy is disguised employment, not freelancing. Any revived KATA that reopens the door to B2B invoicing will need tripwires that distinguish a real freelancer from a re-labeled employee. The old toolkit points to the likely shape:
Per-client concentration caps. The pre-2022 system's signature defense was the 3-million-forint single-payer threshold with a 40 percent surcharge above it. Expect any revival to include a similar per-client ceiling — possibly higher to reflect inflation since 2021, but serving the same function. If 90 percent of your revenue comes from one "client" who also sets your hours, no flat-tax regime on earth will classify you as independent.
A higher headline ceiling. The current 18-million-forint annual cap would bite quickly for B2B freelancers billing corporate rates. Reform proposals floated over the years have suggested ceilings around 24 million forints. Whatever the number, the pattern will hold: a generous but finite box, with a steep rate on everything outside it.
Employment-like indicators. Hungary already has case law and NAV guidance on distinguishing genuine contracts from disguised employment — who sets working time, who provides tools, exclusivity, integration into the client's organization. An abuse-proof KATA would likely cross-reference these indicators, possibly with mandatory disclosure when a single payer dominates your revenue.
Real-time invoice visibility. Since 2021, Hungary's online invoice data reporting has given the tax authority transaction-level visibility into invoicing. Any per-client cap in a revived KATA would be enforceable automatically, not on audit. Assume the authority will know your client concentration before you file anything.
The practical takeaway: if you run a genuine multi-client freelance practice with written contracts and your own tools and schedule, an abuse-proof KATA should welcome you. If your "freelancing" is one full-time client minus the employment contract, no version of this regime will save you — and structuring around the caps would be exactly the abuse the system is being built to catch.
What B2B Freelancers Should Do While Waiting
The revival is a signal, not a statute. Your 2026 taxes are still governed by the current rules. Here is how to position yourself so you can move fast if and when the door reopens:
1. Know your current regime's 2026 math. Most displaced KATA users landed in flat-rate taxation (átalányadó), and 2026 actually improved it: the general cost ratio rose to 45 percent, meaning only 55 percent of revenue counts as taxable income, and it climbs to 50 percent in 2027. The VAT exemption threshold also rose to 20 million forints for 2026. Run your real numbers before assuming any new regime beats what you have — for high-earning freelancers, the improved flat-rate math may already be competitive.
2. Track revenue per client, not just in total. Whatever caps a revived KATA sets — annual ceiling, single-payer threshold, or both — compliance will be measured per client. If your bookkeeping only shows aggregate monthly revenue, you will not be able to answer the first question the new regime asks. Set up per-client revenue tracking now; it costs nothing and doubles as useful business intelligence about your own concentration risk.
3. Keep contracts that prove independence. Written service agreements, project-based scopes, your own equipment, multiple concurrent clients, and control over your schedule are the evidence that separates freelancers from disguised employees. If some of your engagements look thin on paper, fix the paperwork now rather than during a future eligibility review.
4. Stay below the VAT threshold deliberately. The 20-million-forint VAT exemption line for 2026 sits close to where a revived KATA ceiling might land. If the new regime arrives with a ceiling in that neighborhood, freelancers hovering near it will face linked decisions about VAT registration and KATA eligibility simultaneously. Knowing exactly where you stand relative to the threshold puts you ahead.
5. Do not pre-restructure. Do not drop clients, split your business across entities, or shift revenue timing based on a minister's statement. Hungary's tax authority has seen every anticipatory maneuver, and entity-splitting to stay under future caps is the kind of behavior that gets regimes restricted in the first place. Clean books under current law are the best preparation for any future regime.
The Bookkeeping Habit That Matters Most
Strip away the politics and the revival debate comes down to one accounting discipline: knowing exactly who pays you what. Concentration caps, per-client thresholds, and independence tests all run on per-payer data. The freelancers who will glide into a revived KATA are the ones whose ledgers already answer "how much did each client pay me this year?" in seconds.
That means numbering and recording every invoice, reconciling client payments against those invoices rather than against bank deposits in bulk, and reviewing your client concentration at least quarterly. Hungary's real-time invoice reporting means the authority already holds half of this picture; your books should hold the other half, and the two should agree. If you use plain-text accounting, a dedicated income sub-account per major client makes the concentration analysis a one-command report rather than a spreadsheet archaeology project. The Fava dashboard turns those same ledgers into visual income breakdowns, so you can see a dangerous single-client drift forming months before it becomes a compliance problem.
Keep Your Freelance Books Ready for the Comeback
Whether the revived KATA arrives next quarter or next year — and whatever its caps turn out to be — freelancers with clean per-client records will be first through the door. Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data, with version history that proves what your books showed and when. Get started for free and build the per-client ledger that any future regime will reward.
