New PIP rights and their hidden meaning
From July 8, 2026, the District Labor Inspector may issue an administrative decision to determine the existence of an employment relationship if the cooperation formally based on a contract of mandate, contract for specific work, or B2B contract actually meets the requirements of Article 22 § 1 of the Labor Code. This decision is not made unexpectedly. It is preceded by an inspection and an instruction to remedy the violations, and only failure to comply with this instruction opens the way to an authoritative decision. The Inspector retains the existing authority to file a lawsuit in a labor court to determine the existence of an employment relationship.
For entrepreneurs, however, the most serious consequences lie outside of labor law. Changing the classification of the relationship shifts the collaborator's income to a different source for personal income tax purposes, removes the status of their independent business activity for VAT purposes, and changes their eligibility for social security contributions. The amendment also introduced a systemic exchange of information between the National Labor Inspectorate (PIP), the Social Insurance Institution (ZUS), and the National Revenue Administration. Therefore, the inspector's final decision will likely become the starting point for a tax and contributions audit.
Since when has the inspector's decision been in effect?
The principle is that decisions are future-oriented. The date of conclusion of the employment contract is the date of issuance of the decision, and from that date onward, it produces effects in labor law, tax law, social security and health insurance, and mandatory fund contributions. However, these effects are enforceable only when the decision becomes enforceable, i.e., on the day following the unsuccessful expiry of the appeal deadline, on the date the court ruling becomes final, or upon the declaration of immediate enforceability of the decision.
The Act provides for a protective exception. If, between the commencement of the audit and the expiry of the appeal period or the final conclusion of the case, the civil law contract is terminated, terminated, expires, or the actual performance of work ceases, the date of conclusion of the employment contract is deemed to be the date of the audit's commencement. This measure is intended to discourage dismissal of an employee during the proceedings. The literature on this issue is ambiguous regarding the scope of the exception: some commentators limit it to assessing the legality of employment and protecting the permanence of the relationship, while others assume that the extension of the date also applies to tax and social security contributions. Until practice develops, it is safer to plan settlements according to a broader option.
In practice, a dispute over a decision can last for years, and during this time, cooperation continues under the same terms as before. Therefore, it's worth collecting the data needed to correct your PIT, VAT, and ZUS (Social Insurance Institution) tax returns even at this stage, should the decision be upheld.
Income tax
From the date the decision becomes enforceable, the employer acts as the payer. They calculate and collect advance payments, prepare declarations, and submit PIT-11 information, just as for any other employee. The Ministry of Finance confirmed in July 2026 that the decision changes the source of income for the individual covered by the decision from non-agricultural business activity or personally performed activity to an employment relationship, and the individual should correct their settlements for the period covered by the decision. The Ministry also noted that the amendment changed the procedure for determining the employment relationship, not the provisions of the Personal Income Tax Act, so the tax consequences are similar to those that have long been caused by judicial determination of the employment relationship.
The decision itself does not extend back to the past, but past settlements are not closed. The head of the tax office may, in a separate proceeding, determine that the relationship already constituted an employment relationship within the meaning of the Personal Income Tax Act and assess the employer's arrears in advance payments for the entire unexpired period. Such a decision, effectively a change in income source, operates solely for tax purposes and does not change the parties' status under labor law or social security.
The position of the authorities is strengthened by the new Article 201 § 1aa of the Tax Ordinance, effective July 8, 2026. A final decision establishing the existence of an employment relationship, a final court ruling issued regarding such a decision, and a final judgment issued at the inspector's request constitute the resolution of the preliminary issue and are binding on the tax authority. In the event of doubts regarding periods not covered by the decision, the authority may, in turn, request the National Labor Inspectorate (PIP) to conduct an audit. A court dispute also does not benefit the employer in terms of the statute of limitations: filing a lawsuit by the inspector and submitting an appeal against the decision to the court suspend the limitation period for the tax liability pursuant to the added items 3a and 3b in Article 70 § 6 of the Tax Ordinance.
Let's consider an example. A company has been working with an accountant under a B2B contract since 2022. The inspector issues a decision confirming the existence of an employment relationship, which becomes enforceable on October 1, 2026. From that date, the company collects advance payments and bills the accountant as an employee. This decision does not create arrears for the period from 2023 to October 1, 2026. However, after receiving information from the National Labor Inspectorate (PIP), the tax office may investigate whether the B2B contract constituted an employment relationship within the meaning of the Personal Income Tax Act during this period. If so, it will determine the company's arrears in advance payments for this period as well.
For an employee, reclassification means losing the lump sum or flat tax rate and the right to claim actual expenses. Income is then subject to a tax bracket, and with higher salaries, a significant portion falls into the 32% bracket. At the same time, tax previously paid within the scope of business activity may become an overpayment. The Ministry of Finance has indicated that an overpayment disclosed on one account is automatically offset against arrears on another account, along with default interest.
However, the burden of overdue advance payments rests primarily with the employer. Pursuant to Article 26a § 1 of the Tax Ordinance, a taxpayer is not liable for the withholding agent's understatement or failure to disclose the tax base from the employment relationship up to the amount of advance payments the withholding agent was obligated to collect. A withholding agent who fails to calculate, collect, or pay tax is liable for it with all their assets pursuant to Article 30 § 1 of the Tax Ordinance, and the tax authority determines this amount in a decision on the withholding agent's tax liability. Default interest is also charged. Any repayment of these amounts from the employee requires a claim before a common court, and the effectiveness of such a claim is sometimes questionable.
In the background, the taxpayer's fiscal criminal liability under Article 78 of the Fiscal Penal Code for failure to collect tax and Article 80 for failure to timely submit the PIT-11 form remains. The offense under Article 78 may also be committed with contingent intent. However, the Ministry of Finance reminds that merely violating a provision without fault is not a prohibited act, and the assessment will depend on the circumstances of the case, in particular whether the given model of cooperation served to circumvent labor law regulations.
For employment income tax purposes, remuneration generally remains a cost of obtaining revenue, but after reclassification, its recognition is subject to the rules applicable to receivables from an employment relationship and contributions (Article 15, paragraphs 4g and 4h of the CIT Act and, respectively, Article 22, paragraphs 6bb and 6bc of the PIT Act). This may shift the timing of cost recognition when making adjustments for previous years.
VAT
Pursuant to Article 15, Section 3, Item 1 of the VAT Act, activities resulting in income listed in Article 12, Sections 1 to 6 of the Personal Income Tax Act, including income from an employment relationship, are not considered independent business activity. If the parties were in fact bound by an employment relationship during a given period, the collaborator did not act as a VAT payer in this respect and, in principle, should not have issued invoices. The Ministry of Finance explicitly states that reclassification will require the issuance of corrective invoices, with the correction applying only to invoices documenting activities performed within the disputed relationship and for the period covered by the ruling.
For the buyer, this means the risk of losing the right to deduct input VAT from these invoices and, consequently, the obligation to refund the deducted VAT with interest. The proper basis for challenging the deduction appears to be Article 88, paragraph 3a, item 2 of the VAT Act, which concerns invoices documenting non-taxable transactions. In our opinion, classifying such documents as "empty invoices" is an oversimplification: the service was actually performed, and the issue concerns the status of the provider, not the fictitious nature of the event. This is important both for assessing sanctions and for potential fiscal criminal liability.
The issuer of an invoice who has reported tax on it generally remains obligated to pay it under Article 108, Section 1 of the VAT Act, until the risk of reduction through correction is eliminated. The authority may also assess an additional tax liability. Its amount should take into account the circumstances of the case, including the good faith of the parties.
The Ministry of Finance also emphasizes the principle of fault in this area. Liability for issuing or using an inaccurate invoice will depend on the purpose of establishing the relationship, and the basis for assessment should be a legally binding decision regarding the existence of an employment relationship. In doubtful cases, the Ministry refers the applicant to a request for an individual interpretation from the Director of the National Tax Information Service.
Social Insurance Institution (ZUS) contributions
In the area of social security, the National Labor Inspectorate's (PIP) decision also applies to the future. Until it becomes enforceable, contributions are calculated based on the amounts resulting from the existing civil law contract. Once the decision or judgment becomes final, the employer has just seven days to register the employee for employment insurance and from that point on, they calculate and pay standard employee contributions, including to the Labor Fund and the Guaranteed Employee Benefits Fund. Filing an appeal against the decision also suspends the limitation period for contribution payments.
A second track runs parallel. The Social Insurance Institution (ZUS) is independent of the labor inspectorate's findings and can independently determine the correct insurance entitlement. It cannot order a change in the contract form, but as a result of an inspection, it can assign the correct insurance entitlement code and collect contributions due under the employment relationship. If, in a separate proceeding, it determines that the employee did not meet the criteria for conducting non-agricultural business activity, contributions will also become due for the earlier period, within the five-year limitation period. However, this will be based on the ZUS decision, not the inspector's decision itself, which will constitute strong evidence in such proceedings.
A significant difference concerns the settlement of previously paid contributions. For contracts of mandate, the act provides for the offsetting of contributions paid under these contracts against new employee receivables, protecting the employer from interest. However, this mechanism does not explicitly apply to B2B contracts. The payer of the previous contributions was the employee themselves, acting as an entrepreneur, and given the lack of an identified payer, their offset against the employer's obligation is questionable. Transforming the B2B model therefore creates a separate and complex settlement problem, in which the employee may seek a refund of unduly paid contributions, while the employer is charged the full amount of employee contributions. An additional risk is that the authorities may assume that the amounts paid based on invoices constituted net remuneration, leading to a gross-up of the assessment base. The possibility of recovering the portion of contributions financed by the insured from the employee is limited.
Example: the company cooperated with an IT specialist for two years on a contract basis
B2B. The inspector issued a decision confirming the existence of an employment relationship, which became final. From that moment on, the company has seven days to register for insurance as an employee and begin paying employee contributions. Overdue contributions for the three years of employment do not become due based on the PIP decision alone. However, they can be determined if the Social Insurance Institution (ZUS) conducts its own audit and issues a decision on a different insurance title for the past period.
Retroactive effects in court proceedings,
The inspector doesn't have to stop at an administrative decision. Pursuant to Article 33a, Section 6 of the National Labor Inspectorate Act, the District Labor Inspector may file a lawsuit to determine the existence or content of an employment relationship, particularly if it is necessary to determine the employment relationship for a period prior to the period covered by the decision. From a settlement perspective, this is by far the most serious scenario.
Unlike a decision, a final court judgment can be retroactive. The historical relationship is then reclassified as an employment relationship under labor law, tax law, and social security law, and the employer must pay outstanding personal income tax advances and contributions for the entire period covered by the judgment. Under Article 201 § 1aa of the Tax Ordinance, the judgment is binding on the tax authority as a resolution of a preliminary issue, and the limitation period remains suspended for the duration of the case. Therefore, a long-term trial does not protect against arrears, but rather accumulates them.
This article is for informational purposes only and does not constitute legal advice.
The law is current as of October 5, 2026.
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