Hungary KATA tax reform sparks debate over entrepreneurship and employment risks

Proposed reforms to Hungary’s KATA tax system, scheduled for 2027, are generating mixed reactions among entrepreneurs. A key feature of the draft is the return of the ability for KATA-eligible individuals to invoice companies, a practice largely restricted in 2022. While this offers significant tax advantages, experts from Niveus warn it could increase the risk of “disguised employment,” where entrepreneurial contracts are used to mask actual employment relationships.

A survey by Billingo indicates that nearly half of respondents would consider switching to the new KATA in early 2027, attracted by simplified taxation and improved social security benefits. However, many express concern over the planned increase in the fixed monthly tax from 50,000 to 75,000 HUF. Approximately 30.4% of all respondents find the proposed tax amount too high.

The National Association of Entrepreneurs and Employers (VOSZ) noted that while the reform could strengthen small businesses and encourage part-time entrepreneurship, certain restrictions require review. Specifically, VOSZ highlighted the need to examine the 50% revenue limit from a single client to prevent entrepreneurs from losing their status. The reform is expected to benefit knowledge-based service providers and micro-entrepreneurs, potentially reducing the tax burden for some high-revenue consultants by up to 1 million HUF annually.