Monday 5 June 2023

Uber And Its Drivers “Must Pay Income Tax”

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Uber driver information page
Uber driver recruiting page. “It Covers The Cost Of Your Car” is the headline in the Costa Rica driver sign up page.

QCOSTARICA – Being a Uber driver is not as simple as registering as a driver and “a job”, a second job for many or be exempt from paying income tax.

The tax expert for Deloitte, Alan Saborio, says that both Uber and the drivers must pay income tax, just any other self-employed person.

Independent or self-employed workers are required to register with the Ministerio de Hacienda (Ministry of Revenue) and report their income and expenses. As to the company, Uber, it is required to file a corporate income tax.

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“Uber, being in gainful activity, has to register and pay Costa Rican income tax (…) we are in Costa Rican territory, the service offered by Uber is taxable income and the service provided by partners (drivers) is too, ” said Saborio.

Humberto Pacheco, lawyer and general manager of Uber Costa Rica, the company “will pay the tax as required by law” but did not specify which ones.

According to Pacheco, each driver is responsible to pay their taxes. Drivers are also required to be up-to-date with contributions to the Caja Costarricense del Seguro Social (CCSS) – social security, a requirement that Pacheco says was not known until now. As to the company, given that the drivers are not employees, it is not required to make the contributions to the CCSS.

Furthermore, customers using the Uber service must be given a “formal receipt” upon request. To do this, the driver has to register with the Taxation department to obtain such, similar to any retail store or other business. The “receipt” can then be used by drivers and customers (who qualify) to deduct the expense from their tax obligation.

Pacheco added that drivers must also provide Uber an invoice to receive their payment from the company (80% of the charges), this enables the company to apply the payment against its income tax obligations.

This also requires Uber to identify all drivers receiving payment, which in turn Taxation can check the tax roll, to ensure the driver is registered.

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According to Saborio, the process is clear cut and Taxation should have no difficulty in collecting taxes, given that all Uber transactions are paid by credit or debit card, that complicates any form of tax evasion.

Taxes aside, if Uber does not conform to the Transport ministry regulations and operates without authorization of the Public Transport Council (Consejo de Transporte Público – CTP), both the CTP and the and the Regulatory Authority for Public Services (Autoridad Reguladora de los Servicios Públicos – ARESEP) because they stop receiving their yearly licensing fees .

The CTP licensing fee in 2015 for taxis is ¢78,000 colones.  The ARESEP licensing fee for this year is ¢100,000 colones, giving the ARESEP an income of some ¢1.2 billion colones this year, to finance its operations.

Therefore, it is desirable for the CTP and ARESEP that Uber is regulated.

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The reality of the Uber situation is that, while on one hand the government continues its hardline stand of saying that Uber and its drivers are operating illegally and the CTP not issuing it permits, the Tax department is collecting taxes, both from the company and the drivers. Even though they are operating illegally?

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