UKKO Light Entrepreneur
UKKO Entrepreneur
UKKO Light Entrepreneur
UKKO Entrepreneur
What should you know about contract entrepreneurship and chair-rental entrepreneurship?
When working as a contract entrepreneur or chair-rental entrepreneur, it is important to determine whether the service is sold to the end customer in your name or in the name of the business where you work. This affects how sales, rent, commissions and settlements are treated in your accounting.
The question of whose sale it is cannot usually be determined on the basis of just one factor. The overall situation must be assessed, including:
- What has been agreed in the contract
- How the business operates in practice
- Who receives the customer’s payment
- How the sales are settled
- Whose details appear on the receipt
- How the purchase of the service appears from the end customer’s perspective.
The title used for the arrangement does not, therefore, alone determine how the sale should be treated. The overall situation is relevant. Usually, the customer’s receipt is an important practical indication of whose sale it is. However, the receipt alone does not determine if the contract or the other circumstances indicate a different arrangement.
How can contract entrepreneurship work?
In contract entrepreneurship, the entrepreneur works, for example, in a hair salon, beauty salon or another business. The entrepreneur may work in the premises under their own name or in the name of the business. In one model, the entrepreneur sells services directly to consumers. In another model, the business sells the service to the end customer and purchases the service, meaning the work, from the contract entrepreneur. Contracts and situations may also be open to interpretation.
How can I determine which situation applies?
Start by checking the following:
- Receipt: Whose company name and Business ID appear on the receipt?
- Contract: What does the contract say about sales, responsibilities, rent and settlements?
- Cash flow: Who receives the customer’s payment, and who pays whom?
- Practical operation: Who agrees with the customer on the service, price and any corrections?
- Settlement: Does the entrepreneur receive the entire sale and pay rent on it, or does the entrepreneur receive only an agreed share from the business?
These factors should be considered together. If the contract, receipts and practical operation do not correspond with one another, the matter should be clarified before the accounting is prepared. You can ask the other party to the contract and the Finnish Tax Administration for clarification. We are also happy to help!
Example 1: You sell the service directly to the end customer
In this model, the customer purchases the service from you, and you are responsible for your own sales.
Typically:
- The customer receives a receipt containing your company’s details and Business ID
- The customer purchases the service from you, not from the business
- You are responsible for the work you perform and its outcome as agreed
- You receive the payment yourself, or the business settles the payments to you as agreed
- The entire sale is included in your turnover, and you pay rent to the business in accordance with the contract
- The entire sale is included in your turnover, and the business withholds the agreed rent when making the settlement
In this situation, the entire amount charged to the end customer is generally recorded as sales revenue for your business. The rent or commission paid to the business is recorded separately as an expense.
For example, if the customer pays 100 € for the service and you pay the business rent equal to 30% of your turnover, your sales revenue is 100 €. The 30 € paid to the business is recorded separately as a rental expense. The amount settled to you is 70 €.
Example 2: The business sells the service to the end customer
In this model, the customer purchases the service from the business. You sell your work to the business and receive an agreed share of the work performed.
Typically:
- The customer receives a receipt containing the business’s details and Business ID
- The customer purchases the service from the business
- The business receives the customer’s payment
- You are paid, for example, a percentage of the service price
- Your share is an agreed commission or other compensation for the work
If the customer pays the business 100 € for the service and your share is 70%, your company’s sales revenue is generally 70 € in this model. The full 100 € paid by the customer is not recorded as your sales revenue because the business is the seller of the service. In this case, the 30% retained by the business is not recorded as a separate expense in your accounting either.
What does this mean for accounting?
The accounting treatment depends on which party sells the service to the end customer and what has been agreed in the documentation.
If you sell the service yourself, as in Example 1:
- record the full amount charged to the customer as sales revenue
- record the rent or commission paid to the business separately as an expense
- retain the sales and settlement reports for accounting purposes
If the business sells the service, as in Example 2:
- record the agreed share received from or invoiced to the business as your sales revenue
- do not record the business’s share separately as an expense if it has already been deducted before the settlement
- retain the business’s settlement reports or other supporting documents
The amount paid into your bank account does not always indicate how the sale should be recorded. If the business has deducted its share before making the settlement, it is important to determine whether this is rent, a commission, or a situation where the business sells the service and settles the entrepreneur’s share.
What documents should you retain?
At a minimum, retain:
- The contract and any amendments to it
- Receipts issued to customers
- Settlement reports
- Itemisations of rent or commissions charged by the business
- Reports from the payment terminal or other payment service
- Invoices and payment receipts
- Any written explanation of how sales and settlements are handled
These documents can later be used to demonstrate how the sales were formed and on what basis they were recorded in the accounting records.
In uncertain situations
Contract entrepreneurship arrangements can vary, so this guidance cannot be applied to every situation as such. The name used for the arrangement or an individual detail on a receipt does not alone determine the tax treatment.
If you are unsure whose sale the service is, first check the contract and settlement reports. If the matter remains unclear, you can contact us. If the situation requires an interpretation from the Finnish Tax Administration, we recommend submitting a written request for guidance to the Tax Administration. The written guidance received from the Tax Administration should also be provided to UKKO Customer Service.
Questions concerning taxation, VAT and specific accounting entries must be assessed on a case-by-case basis. UKKO.fi can provide general guidance, but it cannot determine an individual entrepreneur’s tax treatment on behalf of the Finnish Tax Administration.