Whenever you need a service to be provided as an independent activity, you can choose to conclude a collaboration contract/agreement despite of an individual employment agreement/contract in Romania, regarding the tax differences between those two. The law firm Pavel, Margarit and Associates recommends using a lawyer specialized in labor and tax law who can draft the contract/agreement/contractual clauses so that the risk of interpreting the collaboration relationship as an employment one to be avoided.
What is a collaboration contract/agreement and how do we distinguish it from an employment agreement/contract in Romania?
The collaboration contract/agreement is an agreement between two parties that involves the provision of occasional services, under the provision of the Romanian Civil Code, while the employment contract/agreement is an agreement governing employment relationships, labor jurisdiction, vacation issues, salary, the rights and obligations of the parties regarding safety and health at work, the employee benefiting from several rights, such as: the right to weekly rest, annual rest leave, the right to professional training, these aspects being provided by the Romanian Labor Code.
How can we avoid the interpretation of the collaboration relationship as an employment one in Romania?
According to art. 7 point 3 of Law no. 227/2015 on the Fiscal Code, is defined as an independent activity any activity carried out by a natural person for the purpose of obtaining income, which meets at least 4 of the following criteria:
- 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 in the activity are assumed by the natural person carrying out the activity;
- the activity is carried out by using the goods 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 organization and exercise of the respective profession;
- the natural person has the freedom to carry out the activity directly, with employed staff or through collaboration with third parties in accordance with the law.
Therefore, the terms of the collaboration agreement/contract, in order to avoid the interpretation to an employment contract/agreement, must be drafted as clearly as possible to reflect the relationship of independence between the contract/agreement/contracting parties and to remove any relationship of subordination between them.
The law firm Pavel, Margarit and Associates recommends that this type of clauses shall be drafted or revised by a Romanian employment law lawyer specializing in labor and tax law.
Sanctions regarding the interpretation of the collaboration contract/agreement in an employment contract/agreement
The interpretation of the relationship between the contracting parties can be assimilated, from a fiscal point of view, to an employment contract/agreement, applying to the collaboration contract/agreement the same taxes, duties and social contributions as to an employment contract/agreement. These situations may arise in cases where collaboration agreements/contracts use a language specific to labor law or regulate elements specific to employment relationships.
Therefore, from a fiscal point of view, in case of interpretation of an activity as a dependent activity, the rules for determining the tax for income from salaries shall be applied. The income tax and the obligatory social contributions, established according to the law, will be recalculated and transferred, being jointly and severally due by the payer and the beneficiary of the income. Moreover, in addition to these recalculations, penalties may be levied, or contravention or criminal sanctions may be applied, which is why it is essential that the contract/agreement/contractual provisions shall accurately reflect the will of the parties for concluding a collaboration agreement/contract and not an employment agreement/contract.
A specialized lawyer in employment/labor law, tax disputes and litigation may assist clients who came across this situation in order to avoid the sanctions applied by the fiscal authorities.
The law firm Pavel, Margarit and Associates has assisted clients in drafting such collaboration agreement/contracts, as well as in drafting employment agreements/contracts and recommends that they should be drafted or reviewed by a lawyer specialized in labor and tax law in order to avoid disputes or litigation regarding the tax issues related to these types of agreements/contracts.
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