Record-Keeping for Sole Proprietors

The Accounting Act (2000. évi C. törvény) does not apply to sole proprietors: instead, the Szja tv. sets out which records must be kept so that income, expenses, and therefore taxable profit can be established. The detailed record-keeping rules are set out in Annex 5 of the Szja tv.

Basic records and detailed records

A sole proprietor must keep basic records, and, where the nature of the activity calls for it, detailed records as well. The basic records must be kept so that, together with the detailed records, every economic event related to the business that results in a cash inflow or outflow can be tracked in a closed system. An economic event includes, in particular, a sale, a purchase, taking out a loan, granting a loan, and drawing owner's withdrawals. The consideration for a sale of goods or services counts as a cash inflow even when it is settled other than in cash, for example through barter or set-off.

Which basic record applies?

A sole proprietor on profit-based taxation (itemized cost accounting) can choose between the following forms of basic record. The choice applies for the whole tax year and cannot be changed voluntarily partway through:

• Journal-ledger (naplófőkönyv) - a record built on general accounting principles, implementing single-entry bookkeeping.
• Cash book (pénztárkönyv) - the most common form, recording revenues (split into taxable revenue, VAT, and other items) and expenses (materials, wages, owner's withdrawals, capital expenditure, VAT) by serial number, date, and voucher reference. A journal-ledger or cash book is required if the proprietor is entitled to deduct VAT and does not use the simplified method for the local business tax base.
• Revenue-and-expense record (bevételi és költségnyilvántartás) - a simpler alternative, available if the proprietor is not VAT-registered, or does not exercise the right to deduct VAT, for the tax year, and also uses the simplified method for the local business tax base.

Flat-rate taxpayers have an even simpler, separate rule of their own, covered below.

Detailed (supporting) records

Only the detailed records that actually support the income calculation need to be kept. The most common ones are:

• Fixed asset and intangible asset register - tracks the acquisition data and depreciation of assets whose individual value exceeds HUF 200,000.
• Mileage log (vehicle-use record) - needed to account for business mileage and the related costs.
• Accounts receivable register - records outstanding amounts owed by customers.
• Accounts payable register - records outstanding amounts owed to suppliers.
• Wage, other personal payment, and owner's withdrawal register.
• Inventory list - a quantity and value record of stock (goods, materials), particularly important when the business is wound down.

These are the most common ones, not an exhaustive list. Annex 5 also names further, less frequent sub-records (for example, sequentially numbered forms, or sales on credit or through a commission agent); whether these apply depends on whether the corresponding economic event actually occurs in a given proprietor's business.

Record-keeping under flat-rate taxation

A sole proprietor on flat-rate taxation (átalányadó) has the simplest job: if they do not exercise the right to deduct VAT, a revenue-only record is enough, meaning only the revenue columns of the cash book need to be filled in. Invoices and other documents for expenses still have to be kept regardless, since they support the costs actually incurred, even though the taxable base is reduced by the statutory cost ratio rather than by actual costs.

An important rule: if eligibility for flat-rate taxation ends during the year for any reason, the proprietor must switch without delay to a full revenue-and-expense record, or to a cash book (or journal-ledger), together with whatever detailed records are needed. In that case, the costs incurred during the flat-rate period must be entered into the record as a single lump sum, because the loss of eligibility takes effect retroactively to the start of the tax year: the proprietor is then taxed for the entire year under the rules for profit-based taxation.

How long must documents be kept?

Invoices and other documents relating to expenses incurred in earning revenue must be kept until the right to make a subsequent tax assessment lapses. Under the general limitation rule in the Act on the Rules of Taxation, that is typically five years from the end of the calendar year in which the return for that tax year should have been filed. It's worth keeping documents even longer than that as a safety margin, particularly if the proprietor carries forward losses or claims depreciation, since those can affect tax years several years later.

What happens if the records are incomplete?

If the records are incomplete, or unable to support the reported income, the tax authority (NAV) can impose a default penalty. In an audit, lacking documents, it can also assess the tax base by estimation, which typically produces a less favorable result for the proprietor than accurate, continuously kept records would.

In practice

The law does not require the records to be kept on paper or in any specific software. What matters is that they hold the data above in a closed, verifiable system. A well-built app can still take a lot of the work out of it, keeping revenue, expenses, fixed assets, and mileage always up to date, in one place, structured the way the law expects. That's what EV Napló is built for.

This article is for general information only and does not constitute tax advice. Source: the Personal Income Tax Act, 1995. évi CXVII. törvény, primarily its Annex 5 (net.jogtar.hu).

Last updated: July 31, 2026.