How to settle the remuneration for referral of clients?
Usually, consumers are more likely to buy goods or services recommended by friends and family. Positive opinions of third parties make it easier for us to make a decision, especially when the product is recommended by a trustworthy person. All this makes the referral system an increasingly popular form of cooperation, concluded not only with other companies, but also with private individuals. Effective referrals can be rewarded in many ways: vouchers, material prizes, money, etc. In most cases, the remuneration for referring clients takes the form of a commission. The settlement of the remuneration for acquiring clients differs depending on whether the commission is paid to a person running a business or the contract was concluded with a private person.
Remuneration for referring clients - cooperation agreement between companies
The first form of settlement of remuneration for customer recommendation is a cooperation agreement concluded between two companies. If the person recommending our products runs a business, it is enough for him to issue an invoice for the service provided for the amount of the commission received. In this way, the recommending party will show the income on which it will be obliged to pay income tax, and the company using the recommendation and paying money for acquiring customers will be able to include the invoice as tax deductible costs.
Remuneration for referring clients and VAT
Services consisting in acquiring customers in exchange for a commission are, in principle, subject to the basic VAT rate. This means that an active VAT taxpayer dealing with the acquisition of customers for another company is required to issue an invoice for this with a 23% VAT rate.
A person running a business and benefiting from the subjective exemption, i.e. up to the PLN 200,000 annual turnover limit, may also issue VAT-free invoices for customer referral services (pursuant to Article 113 (1) and (9) of the VAT Act). This position was confirmed in the interpretation of the Tax Chamber in Katowice of March 4, 2015 (IBPP1 / 443-1187 / 14 / AW):
„(...) will be able to benefit from the subjective exemption from tax on goods and services, pursuant to Art. 113 paragraph. 1 of the VAT Act, in connection with the extension of business activity to the services of "client recommendation" of a financial advisor, because the services in question do not constitute services excluding the right to benefit from the subjective exemption”.
Third-party customer acquisition services are therefore not exempt from VAT.
It may also happen that people who conduct business activity exempt from VAT (e.g. doctors, psychologists) receive remuneration for recommending clients in the form of commissions for other companies. In such a case, customer referral services may benefit from the subjective exemption (up to the relevant turnover limit), and the other activities provided as part of the said activity are still subject to exemption. After exceeding the aforementioned turnover limit, it will be necessary to register the entrepreneur for VAT and issue invoices at a rate of 23% for services benefiting from the subjective exemption. In this case, the services exempt from the subject will still not be taxed with VAT, and thus the entrepreneur will start a mixed sale.
What type of contract should be drawn up with a natural person at the request of clients?
When providing customer referral services, there are usually no characteristics of the employment relationship, such as:
- continuity and repeatability - the employee is obliged to constantly perform the tasks contained in the employment contract, at repeated intervals;
- specific time and place of work - the time and place of performance of duties is determined by the employer;
- subordination - the employee is obliged to follow the employer's instructions under his direction.
Bearing in mind the above regulations of the employment relationship, in most cases it is not necessary to sign an employment contract with a natural person who is the recommending party. The most adequate form of cooperation seems to be a mandate contract, under which the contractor undertakes to perform specific activities for the principal, in this case acquiring customers. The Labor Code does not apply to civil law contracts, so the contractor is not entitled to vacation leave and other privileges relating to full-time employees.
Of course, each case should be considered individually, as it may happen that a given company employs full-time sales representatives, working on a regular basis and dealing with customer acquisition in accordance with strictly defined procedures. This form of employment already bears the features of an employment contract. Distinguishing between the characteristic features of an employment contract and a mandate, and then signing an adequate contract is very important, because it protects the person running a business against possible questioning of the form of cooperation by the National Labor Inspectorate (PIP).
Contract of mandate and full-time contract - ZUS contributions
The mandate contract usually requires payment of health insurance and social security contributions, with the exception of the voluntary sickness contribution. However, we have a number of exceptions here, e.g. employing a student who has not reached the age of 26 (complete exemption from paying insurance contributions) or a person with other insurance titles, provided that the total amount of remuneration for these titles is at least equal to the national minimum (obligatory only health insurance contribution).
It should be borne in mind that if an employment contract is signed, then it is obligatory to pay the health insurance contribution, all social contributions and contributions to the Labor Fund and the Guaranteed Employee Benefits Fund (with some exceptions). Regardless of whether a contract of employment or a mandate is concluded, some contributions are financed entirely by the employer, some entirely by the employee, and the remaining costs are shared between the employer and employee.
Remuneration for clients' recommendation - how to settle?
Remuneration for clients' recommendation is usually settled with the contractor:
- as the sum of the specified base of remuneration and referral commission,
- based solely on commissions from acquired clients.
The minimum hourly wage does not apply to contracts with two cumulative conditions:
- the contractor decides about the place and time of performing specific activities,
- the contract is entitled to commission only. Commission remuneration is eagerly used in contracts where the most important thing is the effect, i.e. acquiring as many customers as possible for the company. The commission-based remuneration system usually motivates to action and makes the results achieved by contractors better. A possible permanent basis for the work performed gives a sense of security and stability, and the amount of commission depending on the final effect achieved in most cases increases the efficiency of contractors. However, it should be borne in mind that this type of solution is not good for everyone, because a lot depends on personality traits.
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In order to determine the amount of deductions from remuneration, the commission received should be added to other income and the income tax advance should be calculated from this sum. The basis for the calculation of social security contributions for the contractor receiving remuneration for referral of clients in the form of commission is income, while the basis for the calculation of health insurance premiums for this contractor is income less social contributions financed from the contractor's funds. This means that the value of the commission in a given month affects the amount of income tax and ZUS contributions to be paid.
The commission received by a full-time employee is also income on which income tax and insurance premiums are paid.