The Head of the National Revenue Administration reacted strongly to a joint-stock company’s request for a protective opinion regarding the change in the form of employee employment. Such an opinion serves to confirm that the method of tax settlement is not intended to circumvent the law.
The company planned to establish a subsidiary, of which it would be the sole owner, and then replace the employment contracts of its current employees with service contracts concluded with the new subsidiary as part of their own business activities. The request for the opinion was denied, with the reasoning that the purpose of these actions was tax avoidance. The refusal was justified by current PIT (Personal Income Tax) regulations, which aim to limit the use of fictitious employment. This involves the taxpayer establishing a business while actually performing services for only one entity in a manner typical of an employment relationship. Moreover, it was emphasized that such a company exhibits artificial behavior to pay lower taxes.
Employment based on a B2B contract is beneficial for employers because they save on social security contributions, and for employees, as it allows them to earn more. With a B2B contract, an employee can pay a flat tax rate of 8.5% or 12%, while under an employment contract, if annual income exceeds 120,000 PLN, the tax rate increases to 32%. It was clearly stated that maneuvers like the one proposed by the joint-stock company could be treated as tax avoidance or even as fictitious employment. The consequence of this could be the imposition of back taxes, and the employer penalized in this way may later seek to recover the calculated difference from the employees.
Following this refusal, it can be expected that transitions from employment contracts to self-employment may be more closely monitored by tax authorities. It should be considered that verifications regarding fictitious employment may become more stringent. Individuals working on B2B terms with their former employers must be aware that, in the event of an audit, the issue of changing the form of employment may be thoroughly scrutinized.
