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Government submits small business tax changes

The government submitted its proposed changes to the tax for small businesses (kata) to parliament on Monday.

In a statement, the finance ministry told MTI that after the changes kata would still offer the smallest businesses the benefits of paying “small amounts with little red tape”.

According to the ministry, new rules were necessary because “certain employers forced their employees into a kata status” and thus “caused damages to the central budget, employees, and honest taxpayers”.

If parliament passes the new rules into law, entrepreneurs in the kata systems will pay a flat tax of 50,000 forints (EUR 122) per month, if their annual revenues do not exceed 18 million forints, the ministry said. The new rules will ensure elimination of “hidden employment” as the preferential tax will be restricted to entrepreneurs selling their own products or offering their own services to residents, the statement said. Kata payers, with the exception of taxi drivers, will thus generate revenues from private individuals only, it added.

The new rules are expected to take effect on September 1, while taxpayers will have until September 25 to indicate if they wish to stay in the modified system or prefer other forms of taxation.

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