#tax liability for gifts in kind

Influencer marketing is all the rage in today’s advertising world. It is now common for companies to request influencers for advertising purposes. Influencers receive the product to be advertised as a gift from the company while in return they undertake to write about the new skin cream in their own beauty blog or on Instagram, for example, or to advertise fitness and diet products.

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This practice does not qualify as gifts under tax law because the products were not given free of charge. An exception applies only to gifts in kind with purchase costs of less than 10 euros. Rather, a consideration is provided by means of the advertising activity. Providing the items in expectation of a consideration is therefore a “non-cash benefit” from a tax point of view and is taxable as such.

The value of an item provided, which is used as basis for the tax assessment, is its acquisition price. For second-hand goods, the value used as a basis is the amount that the item would have achieved through a sale at the time of providing it. In the case of sponsored trips, the equivalent value of the trip is also deemed to be income.

The value of these gifts in kind is to be taxed as income by the influencers. Even gifts that are used privately must be entered in the accounts and tax records in accordance with statutory requirements, as the receipt of the item is based on the influencer’s self-employment status, irrespective of product use.

Some businesses that provide gifts in kind are taxing them in a lump sum when giving out the items. It is then necessary, however, for the donating company to declare in writing that it will assume the tax burden. Influencers may submit this declaration to the revenue office and thus prove that taxation has already occurred. Gifts in kind up to a maximum of 10,000 euros may be accepted per fiscal year without having to be taxed again in the influencers’ tax returns.

Practical tip:

Advertising companies are advised to draw the attention of influencers to the resulting tax obligations or to carry out lump-sum taxation, as the conduct of influencers is frequently attributed to the businesses, at least from an external view.

Influencers themselves should also comply with their tax obligations, however, in order to avoid penalty interest and fines, and in the worst case imprisonment, for tax evasion.