Gov't submits bill restricting small business tax to sole proprietors



The government submitted a bill to lawmakers on Monday that would restrict the Itemized Tax for Small Businesses (KATA) to sole proprietors, according to a report by state news wire MTI.

The bill aims to crack down on unscrupulous employers who force their employees to declare themselves KATA taxpayers to avoid making payroll contributions, according to the reasoning for the proposed legislation.

The bill aims to prevent an "attractive taxation alternative for the smallest taxpayers who are genuinely involved in entrepreneurial activities", the authors said, adding that KATA had originally targeted that group of people, but data and business chamber feedback indicate abuse.

"The new KATA eliminates abuse while offering favorable conditions to the smallest businesses," the authors claimed.

The bill would also raise the annual income threshold for eligible taxpayers from HUF 12 million to HUF 18 mln.

Income over the threshold would be taxed at a rate of 40%.

KATA taxpayers pay a flat monthly HUF 50,000 instead of corporate or payroll tax.

On the government's initiative, lawmakers will vote on the bill in an expedited procedure on Tuesday.

The changes might impact some 400,000 people currently using KATA. A group of people opposing the changes is set to protest in front of the parliament building today, from 10 a.m.



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