Higher VAT exemption threshold, more favourable flat-rate taxation, reduced social contribution base
Based on Prime Minister Viktor Orbán’s announcement on 17 November 2025, the Government has reached an 11-point agreement with the Hungarian Chamber of Commerce and Industry. The package includes several tax relief measures specifically targeting sole proprietors, taking effect from 2026.
KATA taxation is not affected by these changes.
Below is a summary of the most important updates for entrepreneurs.
Increase of the VAT Exemption Threshold (2026–2028)
The Government will gradually raise the annual revenue limit for VAT exemption:
- 2026: HUF 20 million
- 2027: HUF 22 million
- 2028: HUF 24 million
This makes operation easier for small businesses, as they can earn more revenue without becoming subject to VAT.
Who benefits?
Sole proprietors who previously approached the HUF 18 million threshold and were concerned about exceeding it or facing invoicing limitations.
Increase of the Flat-Rate Taxation Cost Ratio (from 2026)
For taxpayers using the general flat-rate cost ratio, the deductible percentage will increase as follows:
- 2026: from 40% → 45%
- From 2027: 50%
What does this mean in practice?
- The tax-free income threshold increases by approx. 9%, meaning more income will remain free of personal income tax.
- The taxable portion becomes more favourable as well, reducing the effective tax burden by about 2 percentage points.
Reduction of the Social Contribution Tax Base for Full-Time Sole Proprietors
Currently, the minimum social contribution tax (Szocho) is calculated on 112.5% of the minimum wage. The Government will reduce this base back to 100%.
Concrete figures:
- Current minimum Szocho: HUF 42,530 / month
- After the change: HUF 37,804 / month
This results in several thousand forints of monthly savings for full-time sole proprietors who pay the minimum contributions.
Example Calculation 1 – Annual Revenue: HUF 5,000,000 (Full-Time flat-rate tax scheme Sole Proprietor)
| Item | New System | Old System |
| Revenue | 5.000.000 Ft | 5.000.000 Ft |
| Cost | 2.250.000 Ft (45%) | 2.000.000 Ft (40%) |
| Tax-free income | 1.744.800 Ft | 1.744.800 Ft |
| Taxable income | 1.005.200 Ft | 1.255.200 Ft |
| SZJA (15%) | 150.780 Ft | 188.280 Ft |
| TBJ (18,5%) | 185.962 Ft | 232.212 Ft |
| TBJ (minimum) | 645.576 Ft | 645.576 Ft |
| Szocho (13%) | 130.676 Ft | 163.176 Ft |
| Szocho (minimum) | 453.648 Ft | 510.350 Ft |
| Total tax burden | 1.250.004 Ft | 1.344.210 Ft |
| Tax burden vs revenue | 25,00% | 26,88% |
Example Calculation 2 – Annual Revenue: HUF 10,000,000 (Full-Time flat-rate tax scheme Sole Proprietor)
| Item | New System | Old System |
| Revenue | 10.000.000 Ft | 10.000.000 Ft |
| Cost | 4.500.000 Ft (45%) | 4.000.000 Ft (40%) |
| Tax-free income | 1.744.800 Ft | 1.744.800 Ft |
| Taxable income | 3.755.200 Ft | 4.255.200 Ft |
| SZJA (15%) | 563.280 Ft | 638.280 Ft |
| TBJ (18,5%) | 694.712 Ft | 787.212 Ft |
| TBJ (minimum) | 645.576 Ft | 645.576 Ft |
| Szocho (13%) | 488.176 Ft | 553.176 Ft |
| Szocho (minimum) | 453.648 Ft | 510.350 Ft |
| Total tax burden | 1.746.168 Ft | 1.978.668 Ft |
| Tax burden vs revenue | 17,46% | 19,79% |
Summary: How Entrepreneurs Benefit
The tax changes taking effect from 2026 aim to reduce administrative and financial burdens for entrepreneurs. The greatest beneficiaries are:
- flat-rate taxpayers,
- VAT-exempt entrepreneurs,
- full-time sole proprietors.
Overall, the modifications provide more financial flexibility, lower contribution payments, and simpler operation for the coming years.
