Insurance, earnings, tax: how Uber rolls

18 January 2015 - 02:04 By Asha Speckman

Neville Zikhali, who has been an Uber driver for nearly a year, can make up to R5000 a week, depending on the number of fares he picks up.

If a driver is in the suburbs or an area teeming with well-heeled consumers on a Friday and Saturday, he or she stands to make a tidy income, he said.

But "if you don't master where demand is greatest and the times when demand peaks, then you'll find there is no business".

Zikhali is usually based on 7th Avenue in Johannesburg's Parktown North, an area awash with restaurants and nightlife.

He is not employed by Uber. The company regards him and others who join the Uber network as "owner-drivers", according to Alon Lits, Uber's general manager for Johannesburg.

Drivers are responsible for obtaining passenger liability insurance and paying tax on their commissions.

The company has more than 1000 drivers in its network in Johannesburg, Cape Town and Durban. Lits said recently there had been interest from people in towns such as Port Elizabeth and Nelspruit for Uber to expand to those areas.

A Johannesburg-based driver in the Uber Van category, which is a minibus shuttle service, said his income varied.

"In December, we [my family and I] went on holiday to Mpumalanga and switched off the Uber phone."

But on New Year's Eve, he was able to make R8000.

The commission that drivers earn is 80% of the fare that the company receives via a credit or debit card payment from patrons. The payment is received offshore, in the Netherlands, by Uber International Holdings, which is owned by Uber International.

In South Africa, Uber is registered with the Companies and Intellectual Property Commission as Uber South Africa Technology.

But when consumers pay , they enter into an agreement with the Netherlands-based company .

The Dutch corporate tax rate is 20% on profit up to à200000 (R2.6-million) and 28% on profit higher than that. Dividend withholding tax is 15%, as in South Africa. Corporate tax in South Africa is levied at 28%. But foreign providers of digital goods and services, such as Amazon, have since last year paid 14% digital tax.

Uber, which is estimated to be worth $41-billion, has been criticised worldwide for its tax-avoidance practice of collecting revenue offshore in countries where it pays lower corporate tax.

In December, Belgian authorities ordered a probe into Uber's tax affairs.

This week in London an alliance of more than 20000 taxi and minicab drivers asked the British government to crack down on what they claimed was Uber's "unfair" tax approach - threatening to adopt a similar "avoidance arrangement" if this did not happen, according to the London Evening Standard.

Ireland, where Uber has a subsidiary, submitted in October to pressure from US and European Union regulators and discarded a rule that allowed companies to be registered in Ireland for tax purposes but not recognised as resident.

Marika Muller, a spokeswoman for the South African Revenue Service, said foreign companies operating in South Africa - even though they might not be domiciled or employ permanent staff here - were required to pay tax.

"Depending on the nature of the income and the provisions of any double-taxation agreement between South Africa and the country it is resident in, it may have to pay income tax on its South African source income.

"The goods or services it provides may also be subject to VAT."

Muller would not confirm Uber's tax status in South Africa because section 69 of the Tax Administration Act of 2011 prohibits the disclosure of taxpayer information.

Lits declined to comment on Uber's tax details, but said the company complied with tax requirements.

South Africa's agreement with the US, where Uber's parent firm, which operates in 50 countries worldwide, is based, has been in force since 1997. South Africa also holds a double-taxation agreement with the Netherlands.

The Organisation for Economic Cooperation and Development identified the Netherlands as a tax haven in a report published in 2000. But a report titled Tax Transparency 2014 noted that the country had since substantially implemented internationally agreed tax standards.