Collaboration with sole proprietors, freelancers, and single-member limited liability companies is a common part of doing business today. However, many companies do not realize that it is not the labor inspectorate that poses the greatest threat to entrepreneurs. It is primarily the tax office, which\u2014in addition to the \u201c\u0160varc system\u201d\u2014can also challenge the claiming of costs as tax-deductible expenses or VAT deductions. <\/p>\n\n
Let\u2019s illustrate this with the example of an IT company that has 10 contractors with a total invoicing amount of 4,000 EUR. Let\u2019s assume that the tax office and the social security agency audit only one year (though it could be more): <\/p>\n\n In addition, amendments to the Labor Code that change the way dependent employment is assessed took effect on January 1, 2026. Companies can therefore no longer rely on the assumption that a correctly titled contract or a business license automatically constitutes a legal working relationship. What matters most is how the relationship functions in practice. <\/p>\n\n That is why we have prepared a free e-book titled \u201cThe \u0160varc System in Practice<\/strong>,\u201d which provides a practical overview of the rules, risks Administrative Authority<\/strong><\/td> Advance Payments<\/strong><\/td> Penalty<\/strong><\/td><\/tr> Labour Inspectorate<\/td> –<\/td> 4,000 EUR \u2013 200,000 EUR<\/td><\/tr> Tax Office<\/td> 91,200 EUR<\/td> at least 15% per annum<\/td><\/tr> Social Insurance Agency<\/td> 166,080 EUR<\/td> at least 18.5% per annum<\/td><\/tr> Health Insurance Company<\/td> 76,800 EUR<\/td> at least 15% per annum<\/td><\/tr><\/tbody><\/table><\/figure>\n\n