Regardless of the taxation classification, a possible risk incurred by self-employed activities is the re-interpretation by ANAF as activity dependent on the payer of salary income, if the PFA is also an employee under an ongoing employment contract.
This year, the spot-check audits and extended fiscal audits conducted by ANAF (in companies specialising in IT and other lines of business) have focused mainly on salary income, performing detailed verifications of all the expenses incurred by a company, whether with the provision of services by PFAs or other expenses likely to be considered employee benefits in kind. By analysing the relationship between the company and the PFA, cross-audits may identify the nature of this relationship - dependent or independent.
The consequence of re-classifying the self-employed activity as dependent is that the mandatory income tax and social contributions shall be recalculated similarly to employee salary contributions and payable jointly by the employer and the employee. The word jointly refers to the possibility of the fiscal agent to address either the income payer (employer), or the work provider (employee).
In art. 7, paragraph (1), point 2.1, the Fiscal Code defines the criteria that should be met by an activity in order to be considered dependent:
a) The income beneficiary is in a subordinate relationship with the income payer, respectively the management of the income payer and observes the work conditions prescribed by the latter, such as: job duties and performance thereof, place of work, working hours.
b) In performing the work, the income beneficiary uses exclusively the income payer’s facilities, respectively properly-equipped spaces, special or safety work equipment, work supplies, etc. and contributes his/her physical or intellectual work, not capital.
c) For business purposes, the income payer bears the income beneficiary’s travelling expenses, such as delegation-assignment allowances within the country and abroad, as well as other similar expenses.
d) The income payer bears the annual leave entitlement and the allowance for temporary work incapacity on behalf of the income beneficiary.
If any of the 4 criteria above occurs in the relationship between the company and the PFA, the activity can be re-classified as dependent.
When deciding to start a business activity as PFA, consideration should be also given to the fact that the individual’s liability for the obligations assumed in relation to the activity covers the entire personal property. As a trader, the self-employed individual can be subject to the insolvency procedure.
In order to avoid legal problems , it is important that PFAs are not dependent on one customer , otherwise we risk the work to be reinterpreted by ANAF , and thus income tax and social security contributions will be recalculated on the payroll .
If you have further questions about tax provisions, please contact us.
A & I Consulting Team