Entrepreneur - combining activity with work under a specific specific work contract is not always possible!

Self-employed persons often receive offers of cooperation on the basis of a specific task or commission contract. But should they agree to such a solution? Basically, they run a business and should settle the income for the services provided by issuing an invoice or bill. However, when the contractor insists on a different solution, can it be agreed? Is it possible to combine activity with work under a specific specific contract?

Self-employed and personally performed activities

Tax regulations do not provide an unequivocal answer to this question. Theoretically, a taxpayer is not forbidden to earn revenues both from business and activities performed in person (e.g. a contract for specific work). However, acting both as part of business and personal activity, the tax authority may accuse the taxpayer of exposing the public-law budget to less revenue. A contract outside the business may turn out to be more tax advantageous for the entrepreneur, e.g. due to the possibility of applying 50% of tax deductible costs.

In the assessment of the situation, there are positions which make the possibility of a self-employed entrepreneur taking up employment under a civil law contract depending on the nature of the activities performed. For if the entrepreneur conducts activities of a specific nature (declared and actually performed activities, the scope of which is determined by the PKD), he has the possibility of taking up additional work performed in person, settled outside the activity, if the scope of work performed as part of this work will not coincide with the activities that he performs under business activity. Therefore, if the activities performed, apart from activities, under a civil law contract, are related, even indirectly, to the subject of activities, it should be considered that taxing their performance as activities of a personal nature is inappropriate. Income obtained from work, the nature of which corresponds to the nature of the activity, should be included in the income from the conducted economic activity.

Combining activity with work based on a specific work contract and VAT

The problem raised concerns not only income tax but also VAT. Activities performed in person are usually not subject to value added tax, unlike economic activities. Therefore, it is so important to distinguish whether a given activity coincides with the nature of economic activity or not.

Therefore, if the subject of the business activity coincides with the activities that the entrepreneur intends to perform outside of the activity under a civil law contract, the income should be taxed as part of the business activity and shown as income from its conduct.

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A civil law contract concluded before the commencement of operations

However, there are exceptions to the above rule. This is because a civil law contract has been signed for a specified period of time, even before the entrepreneur started running a business. Then, despite the fact that the subject of the activity performed in person coincides with the subject of the established business activity, the entrepreneur will be able to continue settlements according to the current rules, due to the fact that the contract was signed before the commencement of activity. Such a position was confirmed by the Director of the Tax Chamber in Warsaw in the Individual Tax Interpretation issued on May 14, 2013, ref. IPPB1 / 415-199 / 13-2 / MS.

Facts:

"The presented facts show that the Applicant performs, under the contract for specific work concluded on June 28, 2011, a service in the field of IT, which expires on December 31, 2013. On January 1, 2013, the Applicant started running a sole proprietorship in in the field of IT consulting. The subject of the contract for a specific task falls within the scope of the sole proprietorship conducted by the Applicant economic. "

The position of the tax authority:

"Taking into account the description of the facts presented in the application and the applicable legal regulations, it should be stated that since the contract for specific work was not concluded as part of business activity, the revenues generated on this account should be classified as revenues from activities performed personally, referred to in Art. . 10 sec. 1 point 2 of the Personal Income Tax Act ”.