What is a B2B contract?
A B2B contract, or Business-to-Business contract, is a type of civil law agreement signed between two companies or entrepreneurs. It is often used as an alternative to an employment contract and is popular among individuals running their own businesses. Commonly referred to as self-employment, a B2B contract differs significantly from an employment contract. It outlines the terms of cooperation, scope of responsibilities, remuneration, and other key aspects of the business relationship.
How does a B2B contract work?
When signing a B2B contract, one party agrees to provide specified services to the other. Unlike an employment contract, a B2B agreement is not governed by labor laws, which means it offers greater flexibility but also places more responsibility on the service provider. The specifics of a B2B contract depend on the situation. For example, in the IT industry, such agreements are often chosen for services like software development or software testing.
Is transitioning to a B2B contract worth It?
The key question to ask yourself is: When is a B2B arrangement worth it? The decision to transition to a B2B contract should be well-considered. It’s essential to evaluate the benefits you can gain from this form of cooperation, as well as the challenges it may bring. Below, we outline the pros and cons of B2B contracts.
Advantages of B2B employment
In Polish law one of the main advantages of a B2B contract is the potential to earn a higher net income compared to an employment contract. Thanks to lower social insurance contributions and the ability to deduct business expenses, entrepreneurs can, quite simply, take home more money.
A B2B contract also provides greater flexibility in managing work hours, location, and the method of completing tasks. Entrepreneurs have the freedom to decide how, where, and when to carry out their assignments. Additionally, new entrepreneurs may have access to various grants and funding opportunities.
Disadvantages of B2B employment
Like any form of employment, a B2B contract also has its downsides. In Poland, it does not provide the benefits granted by labor laws, such as paid vacation, sick leave, or other social benefits. Entrepreneurs must take care of their own insurance and savings to cover potential periods of illness.
Income under a B2B contract can be less stable compared to an employment contract. In the absence of assignments, entrepreneurs may face periods with no income. Moreover, those on B2B contracts are responsible for managing their own bookkeeping and handling their own tax filings.
B2B and taxes – what contributions do individuals on a B2B contract pay?
Tax considerations play a crucial role when deciding to switch to a B2B contract. To answer the question of what taxes are required under a B2B arrangement, it’s essential to highlight the three most significant ones. For example in Poland entrepreneurs are obligated to pay taxes in accordance with applicable legal regulations:
Income tax:
1.Entrepreneurs can choose their method of taxation:
- General rules (18% or 32% depending on income)
- Flat tax rate (19%).
2.Social Security Contributions:
Entrepreneurs on a B2B contract must pay contributions for social and health insurance. These contributions are significantly lower compared to those paid by an employer on behalf of an employee under an employment contract.
3.VAT:
Entrepreneurs may opt to become VAT payers, which allows them to deduct VAT from expense invoices. This is particularly beneficial if the entrepreneur incurs high costs associated with running their business.
How to sign a B2B contract online?
Signing documents online is becoming increasingly popular thanks to modern technologies and tools like the electronic signature application SIGNIUS. This enables fast and secure contract signing without the need for in-person meetings.
Electronic signature
One of the key tools for signing contracts online is the electronic signature. It allows for the legal signing of B2B contracts while ensuring full compliance with the law. The electronic signature is widely accepted in business and simplifies handling all kinds of formalities.
Identity verification
When signing contracts online, it is crucial to perform identity verification to ensure that the parties involved in the agreement are indeed who they claim to be.
Electronic seal and timestamp
Additional security measures for contracts signed online include the electronic seal and timestamp. The electronic seal confirms the authenticity of the document, while the timestamp precisely records the exact moment the contract was signed. Documents signed on the SIGNIUS platform are always timestamped.
Summary
A B2B contract is an attractive alternative to a traditional employment contract, especially for those who value flexibility and higher net earnings. However, before deciding on this form of employment, it is essential to carefully consider both the advantages and disadvantages of the arrangement, as well as thoroughly understand the legal and tax implications.
Thanks to modern technologies such as electronic signatures, electronic seals, and timestamps, signing B2B contracts online has become easier and more secure than ever before.
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