B2B is everywhere
B2B-contracts are a popular type of employment in Poland. Our estimation, as a recruitment agency in Poland, is that 60% of all IT-professionals on higher salaries are choosing for this form of contract. The B2B-contract is a civil contract, or as the name implies, an agreement between two businesses.
As we mentioned in our previous blog-post on this topic, it is straightforward to set up your own company in Poland and doing so brings a couple of advantages for both parties compared to a regular contract of employment:
- A linear income tax (VAT) of 19% after tax deductibles (office, laptop, phone, etc.)
- Lower health and social contributions (ZUS) for the first 2 years
- The employer pays no employer contribution, and your monthly invoice is accounted for as a cost, decreasing profit and tax obligations.
So what is the problem?
The government raised concerns about the fact that some of the B2B-contractors only have one employer, with one invoice per month. A construction set up to circumvent costs coming with regular contracts of employment and to benefit from the beneficial tax regime. Instead of paying 32% tax, the B2B-contractor only pays 19%.
A few remarks and comments from the deputy finance minister and other government officials were enough to create drama and confusion.
One of the options considered and mentioned by officials recently is the “entrepreneur test”, in which the Treasury would check whether the B2B-contractors are real entrepreneurs or individuals that should work on a contract of employment. A test to scare off one-man businesses with only one client.
Entrepreneurs were, rightfully so, horrified by the prospect of tax control and higher taxes.
It comes as no surprise that regulations like these would have an immense impact on the thousands of IT-professionals, Polish and foreign companies with significant investments in R&D centres in Poland and suppliers like ourselves, supplying recruitment services to the IT-sector.
The soup is never eaten as hot as it is served.
The Dutch use this saying when it’s not going to be as bad as it sounds at first.
The Ministry of Finance was very quick to emphasise that there are no plans at this stage to implement the entrepreneur test. It was merely a free discussion rather than a preview of new regulations. No work was done, and nothing is planned in this matter.
Even Jadwiga Emilewicz, the Minister of Entrepreneurship and Technology, was sceptical about the idea.
The entrepreneur’s test is pretty much dead before arrival. It’s not here, and there are no indications that it will be implemented anytime soon.
Experts do not believe in the idea of a test and predict its failure because of how easy it would be to circumvent the measure.
As soon as the first rumours about the entrepreneur test appeared, professionals began to wonder if they could invoice each other to avoid the “one client” situation.
Suggestions were that companies could be created with the sole purpose of invoicing and invoices could be issued to two separate companies.
Would such tricks protect the entrepreneur from failing the test?
At this stage, there is no entrepreneur test, no regulations and no plans to change this. So it is impossible to judge who according to the government would be a real entrepreneur and who would be not.
It’s safe to say that nothing is going to change anytime soon. As an IT-recruitment company and dealing with IT-professionals in Poland daily, we will keep a very close eye on this discussion and will report back to you as soon as anything changes.
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Update: 25/04/2019 – The Entrepreneur Test is DEAD
Today the government announced that it’s resigns from introducing the “entrepreneur test”. The idea pushed through by the Ministry of Finance met with criticism of the Ministry of Entrepreneurship.
The Minister of Entrepreneurship, Jadwiga Emilewicz, in an interview assured that the government gave up the project that aroused great emotions. – This is the decision of the Council of Ministers. At the same time, within the Social Dialogue Council, we are to work out the rules for enforcement of the current law, because we realize that the “creative gene” of a Polish entrepreneur makes this self-employment a temptation – explained Jadwiga Emilewicz.