When and how can self-employment be reclassified?

The subject of requalification of service contracts into employment contracts is quite controversial, however there are a number of basic rules that we can analyse to clarify the degree of risk to which employers are subject.

In general, this situation occurs when a company signs collaboration contracts with a legal entity (PFA, PFI) or a natural person, in the form of services, civil agreement, copyright assignment contract, license agreement of some rights intellectual property, etc.

The authorities that can control this practice, such as ITM or ANAF, analyse the legal relationship under the aspect of fulfilling the conditions from the provisions of art. 7 par. 4 of the Fiscal Code, as follows:

• the natural person has the freedom to choose the place and the way of carrying out the activity, as well as the work schedule;
• the natural person has the freedom to carry out the activity for several clients;
• the risks inherent to the activity are assumed by the natural person carrying out the activity;
• the activity is carried out by using the patrimony of the natural person who carries it out;
• the activity is performed by the natural person by using his intellectual capacity and / or his physical performance, depending on the specifics of the activity;
• the natural person is part of a professional body / order with the role of representation, regulation and supervision of the developed profession, according to the special normative acts that regulate the organisation and exercise of the respective profession;
• the natural person has the freedom to carry out the activity directly, with employed personnel or through collaboration with third parties in accordance with the law.

 

In practice, it has been shown that if at least 4 out of the 7 conditions are met, the contract does not in fact represent an employment contract concluded in disguised form, but the inspectors analyze the documents very widely and take into account other aspects such as:

• the number of contracts for the provision of services of the same kind concluded by a company;
• the volume of work performed by the natural person, expressed in number of hours;
• involvement of the natural person in other activities besides those carried out for the company;
• the intention of the natural person to carry out independent work and how it relates to the relationship with the beneficiary company.

 

In the case of freelancing, it is difficult to determine whether the provider could actually have an individual employment contract, given that most interactions are project-based and at best would have concluded an employment contract for a determined period of time. However, it is very important if the individual still has other collaborations in order to be able to prove that a service contract has not been concluded in order to avoid initiating an employment relationship.

Although most economic operators think of ITM as the main authority that can control and sanction the company for such practices, ANAF is also competent to analyse legal relationships and to establish fiscal payment obligations in the form of contributions for employees. When a fiscal control intervenes, the authority analyses all the expenses made by the company and if it observes that certain services were paid and taken as deductible, while the legal relations should have been based on an employment contract, it establishes by decision of tax payment of all taxes, including unemployment and health.

If, following a fiscal control, the erroneous payment of such contributions is required and the economic operator can prove that it was actually a provision of services and not an employment relationship, he has at hand the appeal against the taxation decision before the issuing authority. and subsequently it can be directed with an action in court on the way of the fiscal administrative contentious.

The industries most affected by this risk are IT and programming, Gaming, Marketing and communication, or other areas where staff turnover is very high. If service providers set up a company and work exclusively for a single beneficiary, it is difficult to prove that they should not have concluded an employment contract. Although deprived of many rights and especially social protection, freelancers are themselves the ones who decide to work independently by setting up a PFA or a company to have more freedom in making decisions about the collaboration, such as the place where the activity is carried out, the number of hours they want to allocate, etc. On their part, as providers, there is no risk as long as they comply with their obligations to declare income and pay related fees.

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