In the present case, the taxable entity did not pay an advance on personal income tax from dependent activity on bonuses paid to the employees of another entity. The tax office additionally assessed to it the income tax from dependent activity on these bonus payments plus a penalty of 20 percent of the additional tax.

In the dispute, the taxable entity argued that the competition for the sale of products was intended for an indeterminate circle of persons and was therefore a public promise to various persons. It therefore considered that it was not income from dependent activity (employment) but income from an independent gainful activity (self-employment) or other income of the person who received the bonus.

According to the court, however, the situation was such that it was not a competition for an indeterminate circle of persons, but aid intended for sellers for the taxable entity’s products sold who were employees of another entity.

Pursuant to the Income Tax Act, income from dependent activity is income arising in connection with the simultaneous performance of dependent activity, regardless of whether it is paid by the withholding agent with whom the taxpayer performs dependent activity or the withholding agent with whom the taxpayer does not perform dependent activity.

The third party must pay an advance on income tax

The Regional Court said that “each payer of income is, in accordance with Section 6 (2) the first sentence of the Income Tax Act referred to as ’employer’, even though there does not have to be an employment relationship between the withholding agent and the taxpayer in fact”. Under the Income Tax Act, the obligation of a taxable entity to pay income tax from dependent activity on behalf of a taxpayer, i.e. an employee of another taxable entity, also arises for all taxable entities from whom these employees receive income related to the performance of their dependent activity.

It is clear from the above that if a third party provides an employee of another taxable entity with a bonus in connection with the performance of work for his/her employer, this bonus is also income from dependent activity and this third party is obliged to pay an advance on income tax from dependent activity on behalf of the employee.

Assessing this situation is not easy. However, if it is not really a competition such as “get a reward for shopping in the supermarket”, which is intended for the general public, then the entity that organises the competition should also consider whether by chance it becomes a withholding agent of income tax for these “external” employees.