Online platforms that allow freelancers to issue invoices and settle B2B accounts with clients without establishing a business are gaining popularity. While this solution seems convenient and secure, it can carry significant tax, social security, and even criminal and fiscal risks if business activity is found to be concealed. Tax authorities are increasingly scrutinizing such collaboration models, and the tax authorities now have tools to effectively identify hidden business activities.
Dominik Szlęzak, a tax consultant at BTTP, emphasizes that tax authorities currently have precise tools at their disposal to eliminate cases of freelancers concealing their business activities. He points out that in some situations, using the platform can be justified – for example, when assignments are incidental, meaning the freelancer is not actually conducting business activity. If a freelancer uses the services of an intermediary only a few times a year, it can be argued that the actions are sporadic and the freelancer's business activity is not being concealed.
However, with larger scale collaborations, the situation is different. Dominik Szlęzak points out that if a freelancer uses a package that allows for issuing multiple invoices per month, it will be difficult to defend the claim that they are not conducting business activity. In such a situation, the tax authorities or the Social Insurance Institution (ZUS) may deem the freelancer to be engaged in regular and organized gainful activity, leading to a reclassification of their settlements. Consequently, tax authorities may deem the freelancer to be de facto conducting business activity, resulting in tax and social security arrears.
Another risk is the so-called firm-building and the accompanying criminal and fiscal liability – a fine of up to 720 daily rates, imprisonment for up to three years, or both. As Dominik Szlęzak explains, this has additional implications for foreigners residing in Poland under permits that do not authorize business activity; such action, even in principle, results in deportation.
The freelancer's client is also at risk. The tax authorities may question the right to deduct VAT and deduct the expense from tax-deductible costs if they deem the freelancer's invoice to be unreliable accounting evidence, reflecting a business fiction.
Dominik Szlęzak also highlights platforms' reporting obligations under the DAC7 directive. Platforms may attempt to invoke exceptions for activities performed by their own employees, but as the expert points out, such a position would likely be challenged. Tax authorities should receive transaction reports for user (freelancer) data.
Important points to note:
- tax authorities may reclassify the activities of freelancers paying through platforms as their own business activities;
- the risk concerns not only PIT and VAT, but also ZUS and NFZ contributions and fiscal and penal liability;
- using the platform for a larger number of orders (e.g. several invoices per month) makes it difficult to defend the argument about the non-business nature of the activity;
- for foreigners there is an additional risk of deportation from Poland;
- freelancers' clients may lose the right to deduct VAT and include expenses in costs;
- Platforms are required to report user data under DAC7, and attempts to avoid this obligation may be challenged;
The above changes and interpretations raise numerous questions: how will tax authorities assess the scale of a freelancer's activity? Is issuing a few invoices per month through a platform sufficient to constitute a business activity? How can one protect themselves against reclassification and avoid tax arrears?
If you want to learn how to properly account for your business activities to avoid potential tax risks, it is worth consulting a tax advisor.
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