#Income tax aspects of income via Instagram, YouTube and TikTok
“Influencer marketing” has been a trend in the current advertising world for quite some time. It is now common for companies to request influencers for advertising purposes. The influencers receive the product to be advertised from the company free of charge - in return, they undertake to write about the new skin cream for example in their own beauty blog or on Instagram or advertise fitness and diet products. Such “gifts” are not considered gifts in the tax law sense, as they were not given free of charge. An exception applies only to gifts in kind whose acquisition cost does not exceed EUR 10. Rather, a service is provided in return by the advertising activity of the influencer. The provision of items in expectation of advertising is therefore a so-called "gift in kind" for tax purposes and is taxable as such.
The value of an item provided, which is used as a basis for the assessment for tax purposes, is the “fair market value”, i.e. mostly the acquisition price of the item, Section 6 (4) EStG. This amount counts towards the business income. In the case of used items, the amount is based on what the item would have fetched if it had been sold at the time of transfer. At the same time - or in the case of higher-value products via depreciation over a certain period of time - a business expense is recognized in the same amount, since the Influencer needs the items for the activity.
If the item is not returned after business use, private use is regularly assumed. In the case of private use of the product, there is a withdrawal to be valued at the partial value within the meaning of Section 6 (1) No. 4 EStG. Example: Influencer P receives a sports outfit worth EUR 80.00 free of charge. P promotes this on her Instagram profile and, in a first step, has operating income but operating expenses in the same amount. In the next step, it is assumed that P makes a withdrawal through the subsequent private use of the training outfit. The decisive factor for the value to be assessed is the value of the now used item; in the case of used clothing, this is regularly around 20 percent of the acquisition costs. The tax payment for the partial withdrawal is therefore only made on an amount of EUR 16. It should be noted that the partial value depends on the individual case and, in the case of electronic equipment, for example, is to be assessed significantly higher than for used clothing. Online platforms for used items can provide some guidance.
Exception from taxation by the Influencer
- If the product is returned, there is no taxable withdrawal to private assets.
- Lump-sum taxation: Some companies that issue gifts in kind pay a lump-sum tax on them when the item is given. However, it is necessary that the company declares the assumption of the tax burden in writing. The Influencer can submit this declaration to the tax office and thus demonstrate that taxation has already taken place. In this way, gifts in kind worth up to a maximum of EUR 10,000.00 can be accepted per company per fiscal year without having to pay tax on them again in the tax return.
- If the influencer activity is carried out on a part-time basis and the main activity generates income from an employment relationship, an exemption limit of EUR 410.00 per year applies (Section 46 (2) No. 1 EStG), i.e. provided the income does not exceed this amount, the income from the influencer activity is tax-free.
Commercial or freelance activity
Furthermore, the question of whether the income results from commercial (§ 15 EStG) or freelance (§ 18 EStG) activity must also be clarified. Only commercial income is subject to trade tax. If the writing, teaching or artistic aspect predominates (as in the case of blogs, for example), the income is from freelance activities. However, if income is generated by advertising products - as is the case in the majority of cases on Instagram and the like - in the vast majority of cases this is a commercial activity, i.e. the income is not only subject to income tax but also to trade tax once an exemption amount of EUR 24,500.00 is exceeded.
The tax registration questionnaire must be submitted to the tax office within one month of the start of your activity. This will only be possible electronically from January 1, 2021. This way, you can also quickly coordinate with the tax office on the type of activity.
Incidentally, on July 30, 2020, the German Federal Ministry of Finance published an FAQ “I am Influencer. Do I have to pay taxes?”, which provides a nationwide overview of the tax implications.
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