In Hungary, individual entrepreneurs can choose from several taxation schemes: KATA, flat-rate tax, or the classic personal entrepreneur income tax (VSZJA).
Flat-rate taxation is a simplified tax scheme for individual entrepreneurs, where actual expenses do not need to be documented with invoices. Instead, a fixed cost ratio can be applied to revenue. The remaining amount is considered taxable income.
Let’s take a look at the limits and rules for 2025.
1. Annual Revenue Limit 2025
Flat-rate taxation can be chosen if the annual revenue does not exceed the following limits (pro-rata in case of partial-year operation):
- 40% and 80% cost percentage: 34,896,000 HUF
- 90% cost percentage (commercial activities only): 174,480,000 HUF
2. Personal Income Tax (SZJA) Free Revenue Limit
A major advantage of flat-rate taxation is that a certain amount of income is exempt from personal income tax (SZJA).
For 2025:
- Income up to 1,744,800 HUF is tax-free.
Translated into revenue depending on the cost percentage:
- 40% cost percentage: 2,908,000 HUF / year (standard rule)
- 80% cost percentage: 8,724,000 HUF / year (for certain activities listed in the SZJA act.)
- 90% cost percentage: 17,448,000 HUF / year (for commercial activities only)
Important: In this case, the income is also exempt from social security contributions (TB 18.5%) and social contribution tax (SZOCHO 13%), except for the minimum contribution obligation for full-time entrepreneurs, when the contribution base is at least the minimum wage or guaranteed wage minimum.
3. Taxes and Minimum Contribution Payment (2025)
In the flat-rate tax scheme there are 3 main type of taxes that should be paid by entrepreneurs. These are the following:
- SZJA (personal income tax) 15%
- TBJ (social security) 18.5%
- Szocho (social tax) 13%
Let’s not forget that the above taxes are calculated after deducting the tax-free allowance and the cost ratio from our revenue. To make this clearer, let’s look at an example.
Example
John is engaged in some side business activities while being a full-time student. He is a part-time entrepreneur, his activity falls under the general 40% cost-ratio, and his annual revenue is 5,000,000 HUF. First, we need to calculate his taxable income.
| Revenue | Cost (40%) | Income (60%) | Tax-free limit | Taxable income |
| 5,000,000 HUF | 2,000,000 HUF | 3,000,000 HUF | 1,744,800 HUF | 1,255,200 HUF |
Once the taxable income is determined, calculating the taxes becomes straightforward.
- SZJA: 1,255,200 x 0.15 = 188,280 HUF
- TBJ: 1,255,200 x 0.185 = 232.212 HUF
- Szocho: 1,255,200 x 0.13 = 163,176 HUF
Minimum contributions
Flat-rate taxpayers are also subject to minimum contribution payments, if they are considered full-time individual entrepreneurs. The minimum contributions are determined on the basis of the statutory minimum wage or, for those whose activity requires at least a higher school qualification, the guaranteed minimum wage.
| Base | TB (18.5%) | SZOCHO (13% × 1.125) | Total |
| Minimum wage 290,800 HUF | 53,798 HUF | 42,528 HUF | 96,326 HUF |
| Guaranteed wage 348,800 HUF | 64,528 HUF | 50,958 HUF | 115,486 HUF |
The minimum contribution is only mandatory for full-time entrepreneurs; part-time entrepreneurs pay contributions based on their actual income.
4. Reporting Obligations
Flat-rate taxpayers have several reporting obligations to both NAV and local municipalities as follows:
- Quarterly contribution and tax reporting – 58 form submitted to NAV (for contributions and taxes).
- Annual personal income tax return (53 form) – reporting the income determined under the flat-rate scheme and any applicable allowances.
- Local business tax – submitted to the municipality, usually by May 31.
- VAT return, if the entrepreneur is VAT-registered.
While the law does not require flat-rate taxpayers to hire a certified accountant, the complexity of these returns makes professional assistance strongly recommended. This is even more important in special situations—such as cross-border sales or services within the EU or outside the EU—where additional reporting or data submission obligations may arise beyond those listed above.
5. Who Should Consider Flat-Rate Taxation?
Flat-rate taxation is especially recommended for entrepreneurs who:
- issue invoices to both companies and private individuals,
- have actual expenses lower than or roughly equal to the cost percentage,
- have annual revenue not exceeding the revenue limit.
This system allows entrepreneurs to enjoy simplified administration while still benefiting from tax advantages, without the burden of documenting every single expense. An important feature is that all thresholds—such as the revenue cap, the tax-free limit, and the minimum contributions—are tied to the statutory minimum wage. This means they increase in line with any annual minimum wage adjustments, ensuring a predictable and transparent framework over time.
