Disguised employment or small business tax?

The Act on Fixed-rate Tax of Low Tax-bracket (a.k.a. KATA) provides an extremely favorable condition for taxation, however many misuse it: to reduce taxes, enterprises rather make independent contractor agreements falling under small business tax with their employees. This is clearly a disguise for employment. If the reported revenue exceeds HUF 1 million a year, the tax administration will assume that the personal service contract is actually a disguised employment relationship, and the opposite is to be demonstrated by the low tax-bracket enterprise at the time of the tax audit.

How can you prove it? The 7 requirements of small business tax are prescribed by the Act. It suffices if two of the seven conditions are met.

In our blog entry, published in Hungarian, you can find the specific conditions and details.

If you are interested in this topic please contact us for more information in English.