Tax liability for gifts in kind

“Influencer marketing” is a current trend in the advertising world. It is now common for companies to use influencers for advertising purposes and offer them products as gifts. In return, the influencers undertake to write about the new skin cream or diet product in their own beauty blog or on Instagram.

In terms of Tax Law, however, such product transfers are not regarded as gifts, since they are not made available free of charge. An exception applies only to gifts in kind whose acquisition costs do not exceed 10 euros. The transfer of objects in expectation of consideration is therefore a so-called “monetary advantage” and taxable as such.

The value of a surrendered object, which is used as a basis for the assessment of the tax, is the purchase price of the object. In the case of second-hand goods, the amount used shall be that which would have been obtained by selling the goods at the time of delivery. In the case of sponsored trips, the equivalent value of the trip is deemed to be income.

The influencer must tax the value of these gifts as income. Even if he uses the property privately, he must enter it in his accounts and tax records because he has only received it because of his selfemployment.

Some companies that issue gifts in kind pay tax on them at a flat rate. However, you must then declare in writing that you will assume the tax burden. With this declaration, the influencer can prove to the tax office that taxation has already taken place. In this way, gifts in kind worth up to a maximum of 10,000 euros may be accepted per business year without having to be stated again in the influencer’s tax return.

Practical tip

Advertising companies should either draw their influencers’ attention to the resulting tax obligations or apply a lump-sum taxation, as they are often held responsible for the influencers’ behaviour in external relations. The influencers themselves should comply with their tax obligations in order to avoid penalty interest and penalties for tax evasion.

Published in Newsletter Confectionery Industry Special – 2020 edition.