Taxing handmade goods in 2026: KATA, flat-rate taxation and ÖVTJ codes

Craftspeople making jewelry, ceramics, leather goods or decorative woodwork have several favorable tax options in 2026 — the right choice depends on whether sales go to consumers, businesses, or both, and on projected annual revenue.

TEÁOR and ÖVTJ, and why the code comes first

Corporate entities classify their activity with four-digit TEÁOR'25 codes; sole proprietors use six-digit ÖVTJ'25 codes. The New ÖVTJ'25 system took effect on 1 January 2025, with a window through 1 July 2025 for existing businesses to adjust their registered code — getting this right before launch avoids a reclassification later.

Choosing a 2026 tax form

KATA — simplest for direct-to-consumer sales

• A fixed 50,000 forints per month.
• An 18 million forint annual revenue cap, with a 40% surcharge on revenue above that.
• Invoicing a business, even once, ends KATA status immediately.

Flat-rate taxation with the 80% cost ratio

For craftspeople who sell to both businesses and consumers, flat-rate taxation with the manufacturing cost ratio is usually the better fit: 80% of revenue counts as cost, so only 20% is taxable income, and income up to 1,936,800 forints a year is fully exempt from personal income tax in 2026 — as long as the registered activity qualifies as "processing and manufacturing" under the personal income tax act, which handcrafted goods production does.

KIVA for multi-person ventures

Once a craft business grows beyond a single proprietor, KIVA offers a 10% rate in 2026 that replaces both corporate tax and social contribution tax.

VAT threshold

The personal VAT exemption threshold is 18 million forints annually in 2026 — the same figure that caps KATA revenue, which is easy to conflate but governs a different tax (VAT registration, not the KATA flat fee).