How to Freelance in Budapest: What is the KATA System?

A lot of you have asked me how I came to freelance in Budapest as an expat, so I thought I’d write this guide! This is from the persepctive of a third-country (i.e. not from Hungary or the EU) citizen. And of course, I’m not an immigration or tax professional, so these were just my personal experiences. Although everyone’s situations can differ, I hope this gives you some guidance!

A bit of background:
I came to Hungary to work as an English teacher. Since my school employed me, my visa was tied to working with them. In order to change jobs, I would need either a new employer to sponsor my visa, or a way to work freelance. For the sake of flexibility, I chose freelancing! I had some documents from my previous employment, so I started my new visa process with:
-an address card
-a tax number
-a TAJ (social security/healthcare) card

Basics of KATA

Under the KATA system one pays 50,000huf (~$170/month), which covers all your taxes, inlcuding healthcare. You pocket the rest of your income. There are minimal biannual taxes as well. (Again, something to check with an accountant.)

Where to pay: The NAV bank account number I pay to: 10032000-01076349
In the comments box I also include:
My name, my business tax number, and the month for which I’m paying.

There are a few restrictions (again, this is as I understand them, not as a tax professional)
-you cannot make more than 50% of your income from one source (a lot of companies have used KATA to dodge paying employment taxes, but the government is clamping down)
-if you make more than 12,000,000huf (~$41,000)/year, you must pay a large tax on anything that goes over

Pro: If you make a lot of income, your profit margin can be relatively large after paying the static tax rate.

Con: As a freelancer, it’s up to you to gather clients, track down payments, and negotiate breaks. You don’t receive sick leave or paid vacation.

Resources

There is a Facebook Group called Hungary KATA Help. It has been and continues to be so helpful to me as a freelancing expat in Budapest. Use the search function and you’ll probably find answers to your questions, but if not, you can always ask!

Sound like it could be a good fit for you? Do you need a visa to live and work in Hungary? Head to Part 2: How to Get a Freelancing Visa in Budapest