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Hire of Self-Employed

By the Federal Law dd. November 27, 2018, No. 422-FZ, “On experimental introduction of a special tax regime “Tax on Professional Income” in Moscow as city with federal status, Moscow Region and Kaluga Region and the Republic of Tatarstan”, since last January the above-mentioned constituents have enjoyed, on a pilot basis, the new preferential tax regime for individuals, which allows them to get registered as taxpayers of the professional income tax and provide services to legal entities and individual entrepreneurs at 6% tax rate and to individuals at 4% tax rate. Hirers of self-employed persons will not be required to pay any tax on payments to the self-employed.

The Law sets some express restrictions on engagement of self-employed in certain areas of activities. Also, federal legislator was obviously aiming at preventing situations where a business terminates its employment relations with employees and signs civil-law agreements with them as self-employed persons, which are subject to a markedly different preferential tax treatment.

The adoption of the Law certainly brings about – for hirers of self-employed – the long familiar and discussed issue of re-classification of civil-law agreement to employment agreement. While tax authorities and Rostrud (Federal Labor and Employment Service) earlier acted independently from each other, now, in pursuance of the Law adopted they have agreed to perform concurrent checks of employers who in fact hire self-employed persons as their employees, by signing civil-law agreements with them. Relevant information has already been posted on the website of the Federal Tax Service.