What options are available if a person’s expertise is needed but we don’t want to hire him/her under an individual employment contract? The alternative comes from the civil code which regulates the contract of entrepreneurship (also known as “provision of services”):
Article 1851 (1) By the contract of entrepreneurship, the entrepreneur undertakes, at his own risk, to perform a certain work, material or intellectual, or to provide a certain service for the beneficiary, in return for a price.
Article 1854 (1) The price of the undertaking may consist of a sum of money or any other goods or services.
Contractual work may consist of the manufacture of things/objects, the drawing up of a project, the construction of buildings or roads, the provision of tutoring or advice, and various repairs to equipment, installations, etc. In order to conclude a contract for the provision of a service, the service must be unique, must not be of a regular nature, the contractor must determine his own programme and working methods, using his own materials for the performance of the work/service, and must assume the risks inherent in the activity. The contract may specify that the beneficiary is the one who provides the materials, in which case the contractor is obliged to keep and use them according to their intended purpose, to justify how they were used, and at the end to return what was not used in the execution of the work.
If irregularities occur in the execution of the work that are likely to affect the normal execution of the work or its progress, the contractor is obliged to notify the beneficiary, the latter having the obligation to take the necessary measures to remedy the problems. Otherwise the contract may be terminated or the work may continue at the beneficiary’s risk, subject to prior notification.
Article 1861 of the Civil Code gives the beneficiary the right, at his own expense, to inspect the work during its execution, without unduly inconveniencing the contractor, and to communicate his observations to the contractor.
After the contractor notifies the beneficiary that the work has been completed, the latter must check the work, take delivery of it and pay the contractor the price agreed at the conclusion of the contract. The price can be fixed in two ways: a flat-rate price or an estimate price. The flat-rate price consists of a fixed amount which will be paid to the contractor regardless of whether the work took less or more time or cost more or less than initially estimated. The estimate price is calculated on completion of the project on the basis of an estimate which includes the price of the materials used and the price of the work carried out..
As far as the taxation of this type of contract is concerned, it falls into the category of income from other sources, as defined by Article 114 of the Tax Code. Thus, the beneficiary of the contract (the income payer) is obliged to withhold income tax at source by applying the 10% rate on the gross income and to declare it on form 100. The income payer does not calculate and withhold social contributions.
The health insurance contribution is payable by the service provider if he estimates for the current year a cumulative income of at least 12 gross minimum basic salaries per country for income obtained from :
– self-employed activities
– intellectual property rights
– transfer of use of goods
– agricultural, forestry and fish farming activities
– investments
– other sources
In this case, the service provider must submit the single tax return 212 on income tax and social contributions owed by individuals by 25 May of the year following the year in which the income was earned.
This article is in line with the legal provisions in force in November 2023.