Real Business or Non-employed Wage Earner?

The distinction between one and the other may be hard to detect. However, if you both own the operating assets (machinery) and decide the working hours yourself, and in addition, may experience losses, then you are most likely running a business in the perspective of the tax authorities.

On the other hand, if you only work for a single principal who provides all necessary tools/operating assets and furthermore, decides on when and how the work is to be carried out, then you probably will be

considered an employee.

If several of the following points are true, you are most likely running a business:

• You have several principals on a regular basis, consecutively or at the same time.
• You have your own office or workshop.
• You provide the necessary raw materials yourself.
• You use your own operating assets such as machines, transportation, computers.
• Your turnover is generated by delivered goods or services rather than per time unit. However, as a consultant, you may very well be paid by the hour.
• The work does not necessarily have to be carried out by you. Instead you may use someone employed by you.
• The assignment is limited, both with respect to time and extent.
• When the assignment is completed, you cannot demand another from the principal.
• The principal has no professional nor managerial authority over you.
• The principal may complain and seek compensation if not satisfied with the result.
• The principal pays for the assignment as a whole, not for the individual elements such as materials, management, use of machinery etc.

The above list is not complete. Note that there is no single point that is considered decisive. In fact, you must expect the tax authorities to examine your business as a whole before a decision is reached.