The flat-rate taxation option remains available in 2026 as one of the most favorable and least administratively burdensome tax choices for small businesses. Entrepreneurs starting their own businesses this year should seriously consider whether to establish a company or operate as a sole proprietor, as the revenue limit for flat-rate tax has significantly increased, and the deductible cost ratio has risen from 40% to 45%.
Summary of the Key Changes Affecting Flat-rate Taxation
- The minimum wage has increased, resulting in a higher revenue threshold for flat-rate taxation and a higher amount for tax-exempt income (and revenue).
- The deductible cost ratio has increased from 40% to 45%.
- The 112.5% multiplier for determining the social contribution tax base has been eliminated.
From January 1, 2026, the deductible cost ratio of 40% will increase to 45%. Additionally, from 2027, it will rise further to 50%.
For 2026, the deductible cost ratios without the need for documentation are as follows: 45%, 80%, and 90%.
When determining the cost ratio, the relevant factor is not the declared activity but the type of activity from which the sole proprietor derived revenue. This is determined based on the documentation (invoice or receipt) issued by the entrepreneur.
Details of Deductible Cost Ratios
45% Deductible Cost Ratio
This is the default rate. If the taxpayer does not qualify for the 80% or 90% deductible cost ratio, then the 45% rate applies.
80% Deductible Cost Ratio
The personal income tax law lists activities eligible for an 80% deductible cost ratio based on the activity’s 2024 ÖVTJ (Hungarian Statistical Classification of Economic Activities) code, rather than the TESZOR codes as of 2025. The classification is based on the version effective as of October 31, 2024.
Eligible activities with the corresponding ÖVTJ’24 codes include:
- a) Agriculture, forestry (ÖVTJ’24 01, 02); mining (ÖVTJ’24 05–09); construction work (ÖVTJ’24 41–42);
- b) Agricultural post-harvest services (ÖVTJ’24 016), services related to game management (ÖVTJ’24 017001), forestry services (ÖVTJ’24 0240), and green area maintenance (ÖVTJ’24 8130);
- c) Fishing activities (ÖVTJ’24 031), fish farming activities (ÖVTJ’24 032);
- d) Manufacturing of products and services in the processing industry (ÖVTJ’24 10–32), except subcontracted services and other copying activities (ÖVTJ’24 1820);
- e) Specialized construction, including repair of building engineering equipment (ÖVTJ’24 43);
- f) Repair of industrial machinery, equipment, tools (ÖVTJ’24 331), vehicle repair (ÖVTJ’24 4520), repair of personal and household goods (ÖVTJ’24 952);
- g) Taxi passenger transport (ÖVTJ’24 4932), other unclassified land passenger transport (ÖVTJ’24 493901), chauffeur services (ÖVTJ’24 493909), road freight transport (ÖVTJ’24 4941);
- h) Repair of computers and communication equipment (ÖVTJ’24 951);
- i) Photography (ÖVTJ’24 7420);
- j) Textile and fur washing and cleaning (ÖVTJ’24 9601), hairdressing and beauty care (ÖVTJ’24 9602), hobby animal care (ÖVTJ’24 960909–960911);
- k) Catering activities carried out under government regulations on commercial activity conditions (ÖVTJ’24 56);
- l) Driving instruction (ÖVTJ’24 855301);
- m) Postal intermediary services performed on behalf of the universal postal service provider (ÖVTJ’24 532003) AND other activities (ÖVTJ’24 821101, 829902, 661901, 662201, and 920003).
90% Deductible Cost Ratio
This rate applies exclusively to individual entrepreneurs whose entire annual revenue comes from small-scale retail activities regulated by government decree (excluding catering activities), or from small-scale retail activities combined with postal intermediary and other activities performed on behalf of the universal postal service provider. For agricultural primary producers, the 90% deductible cost ratio applies as well.
If the sole proprietor’s activity changes during the year resulting in loss of eligibility for a previously used deductible cost ratio, they must retroactively apply the appropriate lower deductible cost ratio corresponding to their new activity as of the first day of the tax year.
For questions on this topic, consult an expert.