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On the taxation of food couriers and their substitutes

Date of issue
Record no.
Record number of the original statement in Finnish and Swedish: VH/1601/00.01.00/2024


The contract between a food courier company and an individual food courier may provide that another person can substitute the food courier who originally signs the contract. In this case, the substitute courier can temporarily use the courier account, which the company had opened for the originally signed-up food courier. 

In general, the courier company sends all its payouts to the account holder even if the deliveries actually were made by the substitute courier.

  1. Is it possible for the food courier (the account holder) who signed up to assign an invoicing service firm to prepare and send invoices for the substitute courier’s deliveries?
  2. When paying compensation to the substitute courier for the work done, what are the original account holder’s tax obligations?

Background information

Typically, food couriers who sign up with a courier company may use an invoicing service firm. After receiving payouts from the courier company, the invoicing service normally pays wages or trade income to the food courier. The classification of these payments – either wages or trade income (often also called nonwage compensation) – depends on what is agreed in the contract between the courier company and the food courier.

The food courier bears responsibility for handling the deliveries. However, the contract may provide that he or she can invite someone else to work as a substitute. The substitute food courier may be a subcontractor or alternatively an employee to whom the original food courier pays wages. This way, part of the courier company’s payouts will in the end be paid forward to the substitute food courier. From the perspective of taxation, it is important to classify the type of the payment (wages or trade income) and to make sure of proper identification of the payor.

Legal provisions that are applicable:

Under § 61, subsection 2 of the act on income tax (Tuloverolaki (1535/1992)), taxable earnings include wages gained when employment has been exercised, and income similar to wages, and a pension or a benefit, and compensation received in place of such income.

Under § 9, subsection 1 of the act on tax prepayments (Ennakkoperintälaki (1118/1996)), the payor must withhold tax on the amounts paid unless otherwise provided in § 6 of the act on tax prepayments or later in the act.

The meaning of ‘wages’ covers all types of employment income, wages, salaries, pay and compensation received in an employer-employee relationship (§ 13, subsection 1, paragraph 1 of the act on tax prepayments).

Where compensation not regarded as wages is paid in return for a work performance, for a service or for a completed assignment, the nature of this compensation is ‘trade income’. If the recipient of the trade income is not on the Prepayment Register, the payor must withhold tax on the amount paid (§ 25, subsection 1, paragraph 1 of the act on tax prepayments).

Employers must pay health insurance contributions if the employee is covered by the Finnish social security system under the Health Insurance Act (1224/2004). The employer pays their health insurance contribution based on the total payroll (§ 4 and § 5 of the act on the employer’s health insurance contribution (Laki työnantajan sairausvakuutusmaksusta (771/2016)).

The deadline for the payor to report the paid amounts and the taxes withheld to the Incomes Register is the fifth calendar day from the date of payment. However, the payor needs not report a paid compensation in the form of trade income if the recipient is on the Prepayment Register (§ 6 and § 12 of the act on the incomes information system (Laki tulotietojärjestelmästä (53/2018)). 

The Tax Administration’s statement

1. Wages are defined as compensation paid in return for a work performance. If a food courier has engaged the services of a substitute courier to work on the food courier’s behalf, the invoicing service firm cannot pay wages to the food courier in respect of work done by the substitute. This is because the invoicing service is only able to pay wages to the person who signed the contract with the invoicing service concerning payments of wages – involving classification of the payments expressly as wages – and when that person is also the one who actually performed the work and the one in whose name the relevant invoice was drawn up.

In a situation where a food courier and the invoicing service have agreed that the food courier company’s payouts are classified as trade income, the entire payment of the trade income is treated as the food courier’s (the account holder’s) earned income subject to tax (and classified trade income, not wages). When the food courier pays compensation to his or her substitute courier, the food courier is entitled to claim deductions for it, because it is a tax-deductible expense, paid in order to gain or produce income. The food courier can claim it in full, i.e. either claim the total wages plus associated social-security contributions or claim the total trade income paid out.

Example: Food courier A and the invoicing service firm agreed that the courier company’s payouts for food deliveries are classified trade income when the invoicing service pays them to A. An invoice drawn up by A, for €1,000 in total, concerns food deliveries that were made not only by A, the food courier who originally signed up, but also by B, the substitute food courier. The €1,000 is trade income subject to tax and received by food courier A in full.

To compensate for the work the substitute food courier B did, food courier A pays €700 to courier B. In the assessment of A’s taxes for the year, a deduction can be claimed equalling the €700 that A paid to B.

If food courier A submits an application for a revised tax card, the estimated income to be indicated on the application form would reflect all the probable payouts coming from the food courier company that effectively concern both A’s and B’s food delivery work. Correspond­ingly, the estimated deductions on A’s application form reflect the sum of money that A is likely to pay to B over the course of the tax year.

For food couriers that have a Business ID and are thus independent contractors (having a registered business name, or being shareholders in a limited-liability company, in a general partnership or in a limited partner­ship), the amounts received from the invoicing service firm constitute business income subject to tax. When these food couriers pay compensation to their substitute courier, they can claim deductions for the paid amounts – whether wages plus social security, or trade income – because these are tax-deductible business expenses.

It is possible for a food courier to be a VAT taxpayer with a VAT registration if he or she is an independent contractor, or if the agreement with the invoicing service defines that the paid money is trade income (not wages) and the threshold of €15,000 is exceeded over the course of 12 months.

2. The food courier who originally signed up has different obligations to fulfil regarding the payment of compensation to a substitute courier, depending on whether an agreement between the two couriers is an employment contract or a business contract.

In the case of a business contract and in a situation where the substitute courier is not on the Prepayment Register, the originally signed-up courier must withhold tax in accordance with the rate stated on the substitute’s tax card, pay the net trade income to the substitute, and then report the relevant amounts to the Incomes Register. If the substitute fails to present a tax card to the food courier who pays the compensation, the latter must withhold tax at the rate of 60 percent.

In the case of an employment contract between the courier who originally signed up and the substitute, the food courier paying the substitute a wage must withhold tax on all wage payments in accordance with the rate stated on the substitutes’s tax card. Further employer's obligations include regular reporting to the Incomes Register concerning the amounts of wages and the amounts withheld on wages, and regular payments of employer's health insurance contributions. If the substitute fails to present a tax card to the food courier who pays the compensation, the latter must withhold tax at the rate of 60 percent.

The payments to the substitute food courier are outside the scope of application of the provisions on a household’s relieved withholding obligation, enacted under § 9, subsection 3 of the act on tax prepayments.

Page last updated 5/7/2024