Chair rental in hairdressing salons and barbershops in Chile

27 czerwca 2023

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Chair rental in barbershops and ...

If you want to know how the operation model called "chair leasing" works for barbershops or hairdressers in Chile, this article is for you.

"Chair leasing" vs. dependent professional

When a salon operates under the "chair rental" modality, the people who provide the service - barbers, stylists, masseurs -are not hired by the salon, but are independent professionals.

This means that they do not have an employment contract with the company that operates the premises, but work there independently and, therefore, must pay their social laws -AFP, Isapre/Fonasa, etc.-also independently.

In a barbershop that operates on a "chair rental" basis, it is the professional who attends the client who must issue a bill for the service performed.

On the contrary, if the barbershop works by hiring professionals, there will be an employment contract between the company - hairdresser, barbershop, beauty salon - and the professional. In this case, it is the barbershop that must issue the bill to the clients who are treated there.

Why use "chair rental" in my barbershop or hair salon?

It allows you to pay less VAT. Many barbershops and beauty salons choose the "chair rental" model because it allows them to reduce the tax burden on VAT payments. This is because the receipts issued by independent professionals are fee receipts or exempt receipts, which are not subject to VAT. On the other hand, when the hairdresser hires the professional, and therefore the hairdresser issues the invoice to the client, it is more difficult to argue to the SII that such service is exempt from VAT. Let's say it is not impossible, but it requires a greater effort with the accountant. In the "dependent professional" modality, most of the invoices are subject to VAT and you must subtract 19% from the amount paid by the client.
It gives greater flexibility to the professional and the company. Since there is no dependent labor relationship, the "chair rental" model allows both parties greater flexibility in the labor relationship. For the professional, working independently means that there is not necessarily a schedule to keep, which frees him/her to work in more places or even at home.
Aligns incentives. The fact that both parties -company and professional- are independent,means that the incentives of both will be aligned, as both will want to sell as much as possible and provide a good service, so that customers come back.

How does the "chair rental" model work?

To explain it, we will show a typical month of a fictitious company that we will call "Peluquería SpA", which has a single independent professional, "Amiga Barberi". Let's also say that "Peluquería SpA" works in "chair rental" mode, which it leases at a value of 40% of the professional's sales.

To simplify, let's say that in that month"Amiga Barberi" made only two haircuts for $15,000 each.
For each of them,"Amiga Barberi" issued a "Boleta de Honorarios" to the client and "Peluquería SpA" collected the funds.
At the end of the month,"Amiga Barberi" had issued 2 slips for a total of $30,000 and "Peluquería SpA" had $30,000 in the cash box.
As the chair has a rental value equal to 40% of what the professional sells, the value of the chair to be paid by "Amiga Barberi" for that month is 40% of $30,000 = $12,000 + VAT = $14,280.
To close the month, "Peluquería SpA" must issue a receipt for the rental of the chair to"Amiga Barberi" for $12,000 + VAT = $14,280.
Since "Peluquería SpA" already has the money in its cash box, it can collect the $14,280 and transfer the remaining balance of $30,000 - $14,280 = $15,270 to "Amiga Barberi".
"Amiga Barberi" then has to apply the provisional withholding for the issued bills and transfer it to the General Treasury of the Republic, in the amount of 12.5% of $30,000 = $3,750. If you are in the Income Tax exempt bracket, this amount will be returned to you in next year's tax refund.

Using the chair rental method, only $2,280 in VAT had to be paid, which is 60% less than what the $30,000 salewould have paid if the receipts had been issued by the company. That percentage savings may be even higher.

In a future blog we will go into more detail about taxable sales as products or how to set up the company to separate taxable services from exempt services charged to the professional.

How does AgendaPro help me if I operate in chair rental mode?

Regardless of how you operate - chair rental or contract work - AgendaPro makes your life easier for all of these reasons:

AgendaPro allows your clients to book and pay for appointments online, which avoids last-minute cancellations.
AgendaPro provides you with a POS integrated to the platform, so all transactions are automatically balanced. Cash closing and balancing is done on its own.
AgendaPro automatically issues your salon's taxable or exempt receipts and your professionals' fee slips. Forget about handwritten receipts.
AgendaPro gives you a detailed report that reconciles all the services and products you sold, on the one hand, with the POS, internet and cash income and their respective receipts. Whether you have an accountant or file taxes yourself, it will save you hours of work.

This post is not a recommendation or instruction on how you should operate. We recommend you always consult with an accountant before starting to operate. If you don't know one, we can refer you to one.