The so-called KATA – taxation for small businesses in Hungary used to be very popular and attractive for digital nomads, freelancers, and small entrepreneurs in IT sector in the last few years. It used to attract not only domestic individuals, but also people from all over the EU to register as freelancers in Hungary and become taxpayers there. KATA taxpayers used to pay a flat annual tax of approx. €1500 instead of corporate or payroll tax.
A new regulation coming into force in September 2022 will totally change the game for the digital nomads in Hungary.
It will restrict the itemized Tax for Small Businesses (KATA) to sole proprietors only. In practice, freelancers will not be able to benefit from KATA anymore.
Also, small business income over annual threshold of 45,000 EUR will be taxed at a rate of 40%!
Thankfully, Bulgaria offers a great solution as one of the most favorable Tax jurisdictions in the EU. Digital nomads, freelancers, and small entrepreneurs in the IT sector are taxed at a flat rate of approx. 7,5%, regardless of their income.
In Bulgaria digital nomads, freelancers and small entrepreneurs in the IT sector are taxed at a flat rate of approx 7.5%, REGARDLESS OF THEIR INCOME.
EU citizens are allowed to apply and obtain Bulgarian Tax Residency which gives the opportunity for an individual to take advantage of the lowest personal income taxation in Europe and become a tax payer in Bulgaria for his worldwide global income.
This is why many digital nomads from EU countries are choosing Bulgaria to register as tax residents. As an EU member state since 2007, Bulgaria has had a consistently beneficial taxation system which is not likely to change.
Bulgaria also offers one of the lowest social security contributions in EU, lowest business costs in EU (utilities, rental, real estate, commercial properties), friendly business environment, fast and easy procedures.
For more information, you may contact us. For your convenience, you can also book an on-line meeting with our experienced Tax Advisors who will fully advise you on the most beneficial set up option for you in Bulgaria.
