Large food delivery companies have already developed a legal structure enabling their couriers to continue freelancing for them at the favourable flat rate tax despite the change in legislation taking effect as of September, the Hungarian Mediaworks News Center has learned from tax experts. The information raises several questions. For example, if the couriers can continue to work as they have in the past, then why are they protesting?

Tax professionals provided the surprising information to the Hungarian Mediaworks News Center (MW). According to sources, one or more of the large food delivery companies have already developed a legal formula for self-employed couriers working for them in Hungary to continue to be eligible for taxation under the favourable small business itemized tax (KATA) even after a tightening of applicability as of September. Hungarian daily Magyar Nemzet (MN) writes that the information requires some explanation, as the framework a company uses to conclude contracts with employees and business partners would not be newsworthy.

However, in the past few days, food couriers, especially many working for Wolt and Foodpanda, have been at the forefront of the anti-government demonstrations. Those affected have repeatedly taken to the streets of Budapest to protest the new amendment to the small business tax, which they say will undermine their ability to continue working. Another demonstration has been announced for Monday to draw attention to their cause, most likely by paralysing traffic in the capital, again.

The details of the obtained information are worth a closer look, writes the daily, laying out the main change contained in the recently passed tax amendment: only those small businesses or sole proprietors can can choose the KATA tax option that provide services or sell goods exclusively to individuals. In other words, they – taxi drivers being exempted – cannot invoice corporate clients. Mediaworks News Center learned that according to the legal solution devised by the large food delivery companies, their couriers will henceforth only have a contractual relationship with the individual customers ordering the food to be delivered and not with the delivery company itself.

Thus food couriers can remain in the KATA small business tax scheme.

However, this raises some questions. First of all, if the amended small business tax option continues to be used by food couriers, who don the uniforms of large companies, will the tax authority take no action? According to government statements, the legislators’ intention with the amendment is to close all loopholes that allowed corporate businesses to use this form of taxation to avoid actually hiring employees, circumventing employment laws while optimising taxes, and to restrict the scheme solely to small businesses and self-employed entrepreneurs.

The question is whether or not this method of contracting with the customer for food delivery will raise the suspicion of authorities.

On the other hand, the issue is politically charged. In recent days, some of the couriers rather vehemently engaged in the protests, thus shaping the domestic political situation and becoming a part of it. However, if the existence of the new legal solution, ie. food couriers contracting with individual customers, is a topic of discussion in the tax profession, those who make a living from it must also be aware of it. It is highly unlikely that the couriers, or at least a certain portion of them, do not have the information that they can continue operating within the KATA scheme, while it is an open secret in the tax profession. If this is the case, what is their reason for protesting, Magyar Nemzet raises the evident question in its article.

Since most of the dissatisfied couriers who spoke to the press recently said that their livelihood would be jeopardised if the small business taxation did not apply to them, Mediaworks News Center made some inquiries with authorities and market actors to find out what sort of income food delivery couriers make these days. „A friend of mine who is a courier has just bought a new car,” said a young man, who is a university student and does food delivery only for a couple of hours a day. What does this in fact mean?

According to information obtained by M, if someone delivers food by bicycle full-time for one of the big courier companies and tries to fulfil as many orders as possible, they can make as much as eight hundred thousand forints (approx. 2000 euros) a month, according to the information Mediaworks News Center obtained.

Of course, they incur expenses and pay taxes, but maintaining a bicycle normally does not involve heavy sums and the public burden they are obliged to pay is a monthly 50 thousand forints (approx. 125 euros) flat tax and a roughly similar amount annually in local business tax. If someone uses a scooter or motorcycle, they can make close to 1.2 million forints (approx. 3000 euros) per month. In this case they have to pay the cost of fuel, but still pay only 50 thousand forints a month in taxes and contributions (up to the current 1 million forints limit). Food delivery is the most efficient on four wheels, allowing couriers to make as much as 1.5 million forints (approx. 3750 euros) – monthly, of course. And here is the twist in the story:

Under the current original rules, KATA taxpayers could earn up to the limit of 12 million forints a year or 1 million forints a month and pay a flat tax of 50 thousand forints instead of income tax and contributions if on payroll. In case their income exceeded the maximum limit, they had to pay an additional 40 per cent tax. The amended KATA tax will enter into effect in September when the new rules will set the limit at 18 million forints (approx. 45,000 euros) and food couriers will continue to pay the flat rate of 50 thousand forints even if they happen to earn 1.5 million a month.

Will they remain dissatisfied with the new rules, Magyar Nemzet raises the question.