With the contract for services one person (contractor) undertakes the obligation to make a thing or achieve any other agreed result with the provision of a service and another person (contracting entity) must pay a fee for it. A contract for services may, for example, be performance of construction work, carrying out repairs, works related to maintenance of things.

How does a contract for services differ from an authorisation agreement?
The contract for services is aimed at achieving a result (e.g. building a sauna, repairing a car, translating a book, swiping a chimney). If the goal is not achieved (e.g. the sauna is not completed in due time), this constitutes a breach of the contract.

In case of an authorisation agreement, a service provider (e.g. a lawyer) must perform their tasks as required and work in the name of achieving the goal (e.g. defend the client in court in the best way possible). If the goal is not achieved (the lawyer’s client loses in court), this does not mean that the contract has been breached.

How does a contract for services differ from a contract of employment?
In case of a contract for services, the contractor, i.e. the person performing the work, has more independence when performing their duties than an employee doing the same under a contract of employment. In case of a contract for services, the contractor can freely decide the time, place and manner of their work. Unlike an employee working under the contract of employment, a contractor is allowed to assign the work to a third person. Furthermore, there are no mandatory conditions arising from the law applicable for the contract for services (e.g. minimum pay, rest and work time rules).

In case of a contract of employment, an employee is more dependent on the employer and must subject to the instructions and orders of the employer. An employee is required to perform the duties personally.

Is the contractor required to personally perform the obligations arising from the contract for services?
Contractors are required to perform the obligations arising from the contract personally only if so agreed in the contract for services. In other cases, the contractor may fully assign the work to a third person (sub-contractor). In such case, the contractor will be liable for the activities of the sub-contractor.

If a company (contracting entity) concludes a contract for services with a natural person (contractor), which taxes does the company have to pay on the fee for the provision of services?
A company is required to pay income tax, social tax, funded pension payments (if the person has subscribed to the second pillar of pensions) and unemployment insurance premiums on the sum paid out.