Nelegální zaměstnávání – máte to pod kontrolou?

The Financial Administration has issued a statement regarding the spread of illegal forms of employment, including so-called concealed labor intermediation, and signals intensified audit activities focused on this area.

What situations does the Financial Administration have in mind?

• Suppliers Concealing Dependent Work – This refers e.g. to chains of legal entities that invoice for the delivery of work while employees perform tasks under the direction of the user (customer). If mandatory contributions, such as income tax from dependent activities, social security, and health insurance, are not properly paid in such arrangements, the entity exercising real control over the workforce—namely, the user (customer) —bears the risk of assessments.
• Transformation of Wages – This may involve situations where part of the salary is transformed into various reimbursements that are not subject to taxation—such as travel reimbursements, clothing maintenance reimbursements, or reimbursements for the wear and tear of personal tools. These reimbursements are sometimes paid unjustly or are inflated through the use of flat-rate calculations. The statement also warns about the payment of part of the salary in the form of agreements outside of employment relationships through connected foreign entities or entirely outside the system.
• VAT Fraud – The statement also refers to previous warnings on this issue, which caution that these structures may also be burdened by VAT fraud. If the tax authority proves that the service recipient was aware of (or should have been aware of) the fraud, it may deny the right to deduct or impose liability for VAT not paid by the supplier, or both.

The Financial Administration recommends that companies verify the actual nature of the agreed cooperation. Within contracts with employment agencies, it is advisable to stipulate the agency's obligation, in addition to holding a proper permit from the Ministry of Labor and Social Affairs, to demonstrate that it pays mandatory contributions for its employees provided to the user (customer) and that the provided workers are indeed its employees. In the context of VAT, the Financial Administration also advises caution for taxpayers when selecting business partners and regarding non-standard trading conditions.

The issue of illegal employment, or concealed job intermediation, has been a focus of labor inspection authorities for some time as part of their audit activities. Details on an interesting case in this area can be found in the latest issue of our tax and legal news.

We are ready to assist you with this issue—comprehensively from both tax and legal perspective.

Authors:

Radek Matuštík

David Kužela

Ondřej Havránek

Ondřej Polívka