Taxes and formalities

Fleet partner or sole proprietorship? Tax matters (Part 2)

Kuba

March

2022

What taxes do you pay when you drive for Glovo, Bolt, Xpress Delivery, Free Now and how can you reduce them? We explain!

Income in Glovo, Bolt Food or Stuart, more than a traditional job, will depend on tax matters. Like formal employment, these will vary depending on whether you are employed by a fleet partner or working as a sole trader. And because this is crucial for you as a driver or courier, we have prepared 2 detailed articles, one on each topic. Here is the second one.

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Billing partner vs. sole proprietorship - everything you need to know about taxes:

- How much and on which taxes you can save (fleet partner / sole trader),

- What do you need to do to reduce taxes at your fleet partner and sole proprietorship?

- Where your tax savings come from and what you should control in order to come out ahead.

❗Remember that Appjobs Work is the most beneficial partner on the market - we support all work apps. Please see the dedicated pages for details:

- Glovo partner

- Wolt partner

- Uber Eats partner

- Bolt Food partner

- Stuart partner

- Xpress Delivery partner

- Uber partner

- Bolt partner

- Free Now partner

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Fleet partner (billing partner), sole proprietorship and taxation

In the previous article, we explained why Bolt Food, Stuart, Glovo and other platforms do not 'hire', but offer cooperation through intermediaries, the so-called fleet partners (a.k.a. billing partners), or through sole proprietorship. We described the advantages and disadvantages of both solutions. In this article, we will explain in detail both solutions' tax aspects, i.e. how they work and how much you can save on taxation.

Fleet partner (billing partner) - taxes. How does it work?

In the first article, we mentioned that fleet partners are companies that, through a contract, commission you to perform passenger and freight transport services on their behalf. This is a formal employment arrangement so that you do not have to set up a sole proprietorship to work through applications. Billing partners will, in most cases, offer you a rental agreement for your vehicle in addition to the contract of mandate. What is this really about?

Fleet partner (billing partner) - tax optimisation, i.e. contract of mandate + vehicle rental agreement

Fleet partners in Poland most often offer to sign a rental agreement for your vehicle in addition to a contract of mandate. This is not compulsory - a commission agreement alone will suffice for the job - but it allows you to significantly increase your income from Wolt, Stuart, Uber Eats, and other apps. Important: the fleet partner won't actually be using your vehicle. You are the one who will continue to drive it - this is purely about regulatory formalities, which are entirely legal. The aim is to reduce your taxes.

This is because a rental agreement is simply taxed less. Billing partners offer mandate contracts for a smaller portion of your salary (let's assume 20%) as a formal employment base, after which they settle the majority of your income (following the example, the remaining 80%) on the basis of a concluded rental agreement. For example, if you make 1,000 PLN, the first 200 PLN would be settled on the basis of a mandate contract and the remaining 800 PLN on the basis of a rental agreement.

Fleet partner (billing partner) - contract + lease. Is this legal and safe?

This solution is legal and financially beneficial, however, it generates the obligation to account directly to the tax office. Rental income is treated as a different category than income from work, so this cannot be done for you by your billing partner.

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Theoretically, rental income doesn't even have to be reported and it doesn't need a declaration. But just to be sure, it's worth contacting your tax office and asking how to get started. The tax offices are independent of each other and often take a different approach to the same matters - that's by the way, in case you were wondering whether the tax regulations in Poland are easy and straightforward. :)

Beginning drivers and couriers often start with just a contract of mandate to see if this type of work suits them, and if it does, they also sign a rental agreement to increase revenue from Uber Eats, Stuart, Bolt Food and other apps.

Billing partner (fleet partner) - contract + lease. How much can you save?

The good news is that it's not complicated at all. From 2022 onwards, rental income can only be settled on a lump sum basis, where the rate is 8.5%. So, you simply send 8.5% of your rental income for the previous month to a so-called micro-tax account (the same one you use to settle your PIT) every month. The amount to be transferred should be calculated for you by your fleet partner, so you only need to remember to make the transfer once a month. In comparison, a mandate contract is taxed at a base rate of 12% (from July 2022), which is almost half as much, so the differences are quite significant.

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For reference, let's assume that you are a Glovo courier and your income in the app for the last period was 1,000 PLN (and you're not a student):

on a contract of mandate alone you will receive 755.53 PLN after tax (assuming 12% income tax and 20% deductible costs),
on a contract of mandate and a rental agreement you will get 880 PLN after tax (assuming a mandate contract for 200 PLN without voluntary social security contributions + 800 PLN from the rental agreement).

Sole proprietorship instead of a billing partner - taxes. How does it work?

You can also work on apps through sole proprietorship. You do not sign a mandate or rental agreement. Instead, as a company, you invoice the app(s) for services rendered, for certain amounts, depending on the revenue you have generated and the type of services rendered (passenger transport is taxed at 8% VAT, courier services at 23%).

When you work through a sole proprietorship, you perform services for the app. The amount you see in the app is the payment for your services. Similarly to working through a fleet partner, you have to pay income tax and VAT on the service income. The app itself will generate invoices for you based on the income registered in the app. This is called 'self-invoicing' and simply speeds up the process for both sides - you don't have to issue invoices manually and send them to the app, and the app doesn't have to wait for them, so it can pay you faster for your services.

Sole proprietorship instead of a billing partner vs. taxes. How much can you save? Courier apps

Note: Depending on the app, VAT may be included in the amount you see on the app (e.g. Uber Eats) or it may not be visible there (e.g. Wolt).

Let's assume that your visible revenue in the Wolt app is 1000 PLN (this is the amount displayed in the app). Wolt will generate an invoice for you for a total of 1230 PLN, where 1000 PLN will be the net amount and 230 PLN will be the VAT amount. You will receive 1230 PLN in your account. From that, you have to pay 230 PLN to the tax office for VAT, and you still have to pay income tax on the 1000 PLN. You can reduce these taxes with cost invoices.

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Let us take, as an example, a fire extinguisher which you bought for a total of 100 PLN, which means a base price (net) of 81,30 PLN + VAT of 18,70 PLN (23% of the net amount of 81,30 PLN). The net amount will reduce your income tax base, which you will pay not on 1000 PLN, but on 918,70 PLN (1000 minus 81,30). Additionally, you will deduct 18,70 PLN of VAT from the 230 PLN you owe to the tax office for the services rendered, so instead of paying the full 230 PLN of VAT, you will pay it only from 211,30 PLN (230 minus 18,70).

Using the income from Uber Eats as an example, the difference would be that the income of 1,000 PLN shown on the app already includes VAT, i.e. it will be split into the amounts of 813,01 PLN net and 186,99 PLN VAT. The rules for deducting costs are the same, only the amounts will differ. This doesn't mean that earnings in Wolt will always be higher than those in Uber Eats - it's just an example to show that calculations will vary from app to app. As a sole trader you need to be aware of this... or get help from an accountant or a partner.

Sole proprietorship instead of a billing partner vs. taxes. How much can you save? Driver apps

Tax-wise, Uber, Bolt and Free Now are even more confusing. The basis of all calculations is the fiscal cash register - every driver in the business is required to provide it with all the rides taken. The cash register therefore collects information on how much customers have paid for rides. The ride is a service that you offer to your customers. The transport service is taxed at 8% VAT.

So let's assume that you ride with Bolt. Your customers have paid a total of 1444,05 PLN for their rides: 1337,08 PLN net + 106,97 PLN VAT (8% of 1337,08). From this amount, Bolt takes its commission of 25%, with Bolt as a company officially providing intermediary services between you and your customers - and as you already know, such services are subject to a VAT rate of 23%. So Bolt's commission would be 25% of the fees from clients, or 361,01 PLN net, plus another 23% VAT on that amount, or another 83,04 PLN; a total of 444,05 PLN. So, as in the examples above, the apparent income in the Bolt app will be 1000 PLN (1444,05 PLN of fees from customers minus 444,05 PLN Bolt commission + VAT for the intermediary service).

The fact that Bolt is an intermediary means that clients pay you for the service and Bolt simply takes a commission for the intermediary. In our example, the clients paid you a total of 1444,05 PLN, of which 106,97 PLN is VAT. You must pay this tax to the tax office. Remember that Bolt, in taking a commission from you, is doing so on account of intermediation - and intermediation is an expense for you! Bolt has therefore charged you a total of 444,05 PLN in commission: 361,01 PLN net + 83,04 PLN VAT, and has also issued you an invoice for the intermediation service, which you can expense. As a result, your income tax will be calculated not on the amount of 1,000 PLN, but on 638,99 PLN (1000 PLN of income minus 361,01 PLN net for Bolt's commission), and the VAT you have to pay to the tax office will amount to 23,93 PLN instead of 106,97 PLN (106,97 minus 83,04).

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You can already see that every expense makes a difference to your earnings - especially since, on a sole proprietorship, you can account for all expenses that are necessary for the purpose of generating revenue and documented by an invoice issued to the company. Accounting for expenses can really save you a lot.

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Sole proprietorship instead of a billing partner - how to save on taxes?

The flagship example is depreciation, or the tax deductibility of the loss of value of an asset. It is no secret that cars quickly lose their value - but if you bring a car into your company's assets, the loss of value will be an expense for you, and that means lower tax. Depending on the initial value of the car, you can save a nice few thousand zloty a year in income tax! ATTENTION: If you rent the car to your partner under a rental agreement, depreciation is out of the question - firstly, you are not running a business, secondly, from 2022, income from a rental agreement is obligatorily taxed as a lump sum, and with this form of taxation, you cannot deduct costs. You can therefore only account for depreciation as a sole trader.

What if you don't own a car or don't want to bring it into your business assets? Consider renting or leasing a new one. In the case of sole proprietorship, the installments of such contracts are an expense, so here too you will save a lot of money on taxes, both income and VAT. If you buy a new car, the tax savings can be as high as several thousand zloty a year, which can add up to a dozen or several dozen thousand zloty over the length of the agreement!

Sole proprietorship instead of a billing partner - instead of calculating on your own, start working with Appjos Work!

Finally, it is worth considering hiring an accountant when you are a sole trader - the cost is around 200-300 PLN, but such a person will save you a lot of time. They will advise you on taxes (e.g. answer questions on whether you can expense a given invoice) and other matters, such as leasing and depreciation. And on top of that, bookkeeping is also a cost for your business. :)

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❗An alternative is to work with a billing partner - as specialists in the subject of working with apps, they will help with the calculation of invoices and costs, for a much lower commission than a traditional accountant.

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Write to us at [email protected] and ask how it works!

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Sole proprietorship instead of a billing partner - summary

Accounting for costs on a sole proprietorship can be complicated, but the tax savings are well worth it. Remember that you don't have to count everything yourself - you can use an accountancy service. Sole proprietorship can be particularly beneficial if you are planning to buy or have recently bought a car (new or used - it doesn't matter). Remember that the higher your income, the more beneficial the sole proprietorship will be for you, as the social security rates on a sole proprietorship are fixed, not proportional to income.

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In this post, we explained the differences between the tax issues when you are employed by a fleet partner and when working as a sole trader. In the first part, we explained the differences between the two forms of work, their advantages and disadvantages - be sure to check it out if you're wondering how to start working through apps!