According to the provisions of Article 199 of Labour Law an employer may conclude with a particular person a contract for the supply of services for the performance of jobs outside employer’s line of business, and with the aim of independent manufacture or repair of a particular item, or independent carrying out of particular physical labour or intellectual work.
The contract for the supply of services may be entered into with a person performing artistic or other activities in the sphere of culture as well, in conformity with the law provided that such a contract for the supply of services must be in accordance with the single collective agreement relating to persons engaged in independent activity in the spheres of arts and culture, where such collective agreement has been concluded.
The contract for the supply of services shall be concluded in written form.
Contract for the supply of services and basic characteristics
The contract for the supply of services can be concluded with any natural person (unemployed, pensioner, student, persons who are self-employed or engaged in an agricultural activity or the persons who are employed by another employer or the person who is emplyed by the same employer) and only for carrying out activities outside the registered activity of the employer.
Operating time is not subject to the conclusion of the contract for the supply of services. Pursuing of a particular job based on the contract for the supply of services is not time-limited.
By the contract for the supply of services which is concluded with a physical person, it shall be contracted the amount of compensation for the work, as well as other rights and obligations of the contracting parties.
The contract for the supply of services does not constitute a basis for the development of rights, obligations and responsibilities arising from the employment relationship.
If, in addition to remuneration for work, the contract for the supply of services determine and other benefits that the employer shall pay to that person, for example. refund of expenses of transport to work and from work, refund of expenses of business trip or fee for food, the payment of these expenses has character of the contracted fees on which tax and contributions shall be payed as on compensation for their work.
Payment of taxes and contributions on revenue according to the contract for the supply of services
Payment of taxes
According to the provisions of Article 85 paragraph 1 point 1 of Law on Personal Income Tax the revenue which shall be paid on the basis of the contract for the supply of services shall be understood to mean other revenues that by their nature make up the revenue of an natural person.
Tax at the rate of 20% at the expense of the recipient’s income (from fee) shall be payable on the revenue according to the contract for the supply of services. The basis for the payment of taxes constitutes taxable revenue which shall be obtained when the gross revenue is reduced by the standardised costs at the rate of 20%.
Payment of contributions
According to Article 28 of Law on Mandatory Social Security Insurance contribution base for persons who achieved contracted fee shall be taxable income of the contractual fee in accordance with the law governing personal income tax. The base on which contributions are paid on occasion of the payment of the agreed compensation shall not be compared with the lowest and highest monthly contribution base
Contributions for mandatory social security insurance shall be payable from the contracted fee, according to aggregate rate, as follows:
- 26% contribution for mandatory pension and disability insurance and
- 10,3% contribution for mandatory health insurance.
Whether only contribution for pension and disability insurance shall be payable or and contribution for health insurance depends on the status of the person with whom the contract for the supply of services shall be concluded.
According to the status of the person to whom revenues are payable according to the contract for the supply of services the following obligations on the basis of taxes and contributions shall be payable:
- if the agreed compensation is paid to a person who is not insured on any other basis, tax, contribution for pension and disability insurance and contribution for health insurance shall be payable
- for the person who is insured on other grounds (employment, entrepreneur, founding farmer), tax and contribution for pension and disability insurance shall be payable on the contracted revenue
- only a tax shall be payable on the contracted revenue for the person:
1) which from the Fund for Pension and Disability Insurance received confirmation that in that calendar year it was paid for him contribution on the estimated maximum contribution base for that year and that by the end of the year does not make further payments of contributions for pension and disability insurance on contracted fee; and
2) to an foreign citizen for whom, according to an international agreement with the country of origin, the conditions are met that the contributions shll not be payable.