What is meant by ‘self-employed’, what do you need to bear in mind and how should you proceed?
We guide you, giving you the confidence to do everything right from the start.
The threshold for self-employment is quickly crossed. At the same time, however, there are also clear boundaries between self-employment and dependent employment. Once it has been established that you are self-employed, the question immediately arises as to what obligations this entails. Self-employment also comes with responsibility.
Having the contribution status ‘self-employed’ is subjective. This means that a person is provisionally certified by the compensation office as being able, in principle, to pay contributions for a certain activity as a self-employed person. This requires a majority of a catalogue of criteria to be met. However, these criteria apply to each individual job. If it subsequently transpires that this is not the case, the compensation fund will retroactively levy contributions from the alleged client as if the self-employed person had been employed. More on this in the example of ‘bogus self-employment’.
Self-employment is often seen as a solution to avoid the challenges of cross-border employment. But be careful: self-employed people are also subject to rules, more on this under ‘Self-employed from anywhere’. A cross-border setup can only be successful if the situation is crystal clear. In addition, self-employment is also associated with various obligations and uncertainties that you should be aware of.
Student with a sideline
Background
Patrick is studying economics. On the side, he prints T-shirts with funny slogans. His success in this endeavour continues to grow, so he opens a webshop and sells his T-shirts. But he doesn’t set up a company specifically for this purpose.
Assessment
Patrick pursues an activity and generates revenue. He has therefore set up a sole proprietorship. He has to keep accounts, declare income and capital in his private tax return and register with the compensation office to pay OASI contributions.
We support you in getting everything right from the start. Getting it right doesn’t have to be expensive – and costs less than correcting mistakes.
Bogus self-employment
Background
Sandra is a software engineer and runs her own sole proprietorship as a self-employed person. She is registered with the compensation office for OASI contributions and has confirmation to this effect. She accepts an engagement from a software provider to carry out software installations for their clients. She receives a monthly standby allowance for this work. She also invoices the software provider for her work on a monthly basis.
Assessment
Sandra’s work for the software provider is unlikely to fulfill the criteria for self-employment. The following scenario is probable: During the next employer inspection at the software provider, the auditor will establish that her work is a dependent activity. The compensation office will gross up the fees paid and invoice the software provider for contributions to old-age, survivors’ and invalidity, disability, income compensation, unemployment and family allowance insurances, up to five years retrospectively and with interest on arrears. As a result, other personal insurances (accident, illness) and, depending on the amount of the fee, the pension fund must also be informed. The software provider will want the employee contributions back from Sandra. She does not agree, as she has already paid tax on the fees she received and settled her OASI contributions as a self-employed person. Both parties lose.
We can advise you in situations like his, but ideally beforehand to prevent them from arising in the first place.
Self-employed from anywhere
Background
Stefan is a web designer and self-employed. He is registered with the compensation office for OASI payments and has confirmation to this effect. He has a small flat in the south of France, where he spends a lot of time and now has many friends. These days, he also works regularly from France. One day, he receives a letter from the French tax and social security authorities. They want money because he is resident in France.
Assessment
Even the self-employed are not completely free to choose where they work. Depending on their situation and country, they may need a work permit and licence to run a business, and they may be required to pay local social security contributions and taxes.
We advise you in all specialised areas and can coordinate local support through our global BDO network.