Payment of Tax on Self-Employment Income by Reclassification as Employment Income
According to the court's position, when a civil law contract is reclassified as an employment contract, the taxes already paid on the relevant income cannot be consolidated as if the taxpayer under review had been paying tax to the budget on behalf of employees. Such reclassification is possible when the relationship between the parties exhibits certain signs of an employment relationship. For example, when payment under the contract is made in the same manner as to employees (e.g., on specific days, twice a month), when a work schedule, rest periods, and working hours are established, when a workplace is provided, etc.
This means that upon the reclassification of contracts with self-employed individuals into employment relationships, the full amount of income tax, without considering the amounts of tax on professional income already paid, is treated as an arrearage subject to recovery. Furthermore, it is on this full amount that a penalty for the failure to fulfill the obligations of a tax agent will be charged.
The tax on professional income paid by the self-employed individuals can be however refunded to them upon application.
