When Is It Worth Leaving KATA, and What Happens Next?

The simplicity of KATA (kisadózó vállalkozások tételes adója, the flat-rate tax scheme for small businesses) attracts a lot of people, but it isn't worth staying on forever for everyone. Some switch to another tax form deliberately, others are forced to by the revenue cap. Let's look at both cases.

When Is It Worth Deliberately Switching?

KATA's fixed HUF 50,000 monthly rate is most advantageous when your revenue is relatively high, so the fixed amount is proportionally small. But if your revenue drops — say, seasonally, or because you have fewer projects — the fixed amount becomes a relatively bigger burden, since you have to pay it even in a month when you had almost no revenue.

In that case, it's worth comparing it with flat-rate tax: there, you pay a percentage of your revenue, so lower revenue automatically means a lower burden too. You can compare the two forms with actual numbers using Penzum's tax calculator.

What Happens If You Cross the Revenue Cap?

KATA's annual revenue cap is HUF 18 million. If you cross it, you have to pay a 40% surtax on the amount above the cap — this doesn't mean you're automatically removed from KATA, but that you have to settle a significant additional burden on the amount over the cap.

If you're regularly getting close to the cap, or have already crossed it, it's worth planning ahead: does it make sense to deliberately switch to another tax form that year, before the surtax significantly increases your burden.

How Do You Leave KATA?

Leaving is reported to NAV (the Hungarian Tax Authority). It's important to know:

Leaving takes effect from the first day of the month following the report (always check the exact deadlines against NAV's current guidance).
After leaving, you can't choose KATA again for a certain period — this limits switching back and forth between forms for purely tactical reasons.
At the same time as leaving, you have to decide which tax form you'll fall under (flat-rate tax or VSZJA (personal income tax based on actual business profit)) — this doesn't happen automatically, you have to choose yourself, and the choice has its own conditions (e.g. the revenue cap and eligible activities for flat-rate tax).

What to Watch Before Leaving

Look at all three tax forms for the same period — with Penzum's calculator you can compare what your burden would be under KATA, flat-rate tax, and VSZJA for the same expected revenue.
Take your activity into account — not every activity is eligible for flat-rate tax or KATA, check whether you can continue the same work under the new form.
Factor in the increase in administration — KATA requires the least administration; if you switch to flat-rate tax or VSZJA, expect to keep more records.
Don't decide at the last minute — if you're getting close to the revenue cap, the decision should be made weeks in advance, not once the surtax is already due.

Penzum Helps You Decide

Penzum's tax calculator supports all three tax forms (KATA, flat-rate tax, VSZJA), so you can compare in one place which one fits your revenue level and activity. The AAM (VAT exemption threshold) tracker and the obligation calendar also help you notice in time if you're approaching an important threshold.

Unsure about switching? You can find more detailed material on the tax form switching process in the Penzum Help Center. (exact link pending verification and insertion)