Hungary proposes tax reform for small businesses and pension incentives

The Hungarian government has introduced a draft law to reform the 'KATA' small business taxation system, effective January 1, 2027. Under the proposed changes, a new, expanded KATA system would allow part-time entrepreneurs and retirees to participate again, and businesses would be able to invoice companies once more. Key provisions include a monthly tax of 100,000 HUF for full-time entrepreneurs and 50,000 HUF for part-time workers, with an annual revenue limit rising to 22 million HUF. A separate 15 percent supplementary tax would apply to corporate income.

Calculations suggest that while the current KATA system could result in a monthly state pension of only 29,000 HUF after 40 years of work, the proposed reform could theoretically increase that amount to between 170,000 and 180,000 HUF.

In a separate development regarding retirement planning, the state continues to offer a 20 percent tax credit on pension savings. Eligible individuals can receive up to 280,000 HUF in annual tax credits through various vehicles, including voluntary pension funds, pension insurance, and the Individual Pension Savings Account (NYESZ).