1. Why Freelance in Hungary: Hungary’s flexible registration requirements and relatively simple tax system, particularly the KATA system for freelancers, make it a popular choice. Hungary’s rich history, vibrant culture, and relatively low cost of living also contribute to its appeal as a base for freelancers.
*Please be aware that we do not update this information in real time, so you should verify that the law has not changed recently.
Business Structure: Most freelancers operate as sole proprietors (sole traders) without needing to formally register a business. Sole proprietors are liable for all business obligations but face less stringent regulatory requirements than larger companies.
Required Steps:
Submit a notice of business commencement via Hungary’s Client Gate system or in person at a government office.
Provide identification, address proof, and a tax number. Note that a sole trader’s permit is no longer required.
Optional Registration: Although not mandatory, freelancers may choose to register with the Hungarian Court of Registry for additional benefits, such as obtaining a tax ID and business name.
Tax Options:
Lump Sum Tax (KATA): A simplified, flat tax ideal for freelancers earning up to HUF 15 million annually. This system automatically contributes to social security and health insurance.
Business Income Tax: For income exceeding HUF 15 million, freelancers must use a traditional business income tax system with a 9% rate on net income (gross income minus expenses).
Social Security Contributions: Social security payments range between 17.5% and 36% depending on income and can be managed through the KATA system.
Advanced Income Tax Rate: Freelancers may pay an advanced income tax rate of 15%, calculated at 90% of their revenues.
VAT Registration: Hungary has no income threshold for VAT registration, but freelancers must register if engaging in activities like importing/exporting goods, organizing events, or providing supply and installation services.
Standard VAT Rate: Hungary’s VAT rate is 27%, with reduced rates of 18% and 5% for certain goods and services.
VAT Administration: Managed by Hungary’s National Tax and Customs Authority, freelancers can contact this body directly for assistance with VAT requirements.
Mandatory Pension Contributions: Freelancers are required to contribute to Hungary’s public pension system. This defined benefit system has been in place since 1998, covering employees and self-employed workers.
Insurance Options: Freelancers may find private insurance coverage by contacting insurance providers directly or through associations like the Association of Trade Unions of Artists, which supports some self-employed professionals.
By following these steps and utilizing available resources, freelancers can effectively establish and grow their business in Hungary while enjoying the cultural and professional benefits the country offers.