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When is influencer income taxable?
A free product in exchange for an Instagram post, payment for a TikTok video or a commission on sales made through a personal discount code, these can all constitute remuneration for a service.
For tax purposes, it is not only money that matters. Benefits received in kind can also be taxable. Examples include free products, hotel stays, restaurant visits, tickets, travel, services, discounts or commissions through affiliate links.
The tax treatment then depends on the specific situation and, in particular, on how professionally and regularly you engage in influencer activities.
Are you an occasional influencer or is it a professional activity?
Not everyone who is paid once to create content immediately needs to register as a self-employed professional.
Occasional influencer activities
Do you only occasionally enter into a paid collaboration and is influencer marketing not part of an organised professional activity? Then in certain circumstances, the income may be regarded as miscellaneous income.
In principle, such occasional income is taxed separately at a rate of 33% for personal income tax purposes, plus municipal tax. Costs directly related to the activity may be deducted subject to the statutory conditions.
There is no general rule stating that a person automatically becomes self-employed after a certain number of posts or collaborations. The tax authorities look at the specific facts. The regularity, frequency, scale, organisation and professional nature of your activities are just some of the elements that may be taken into account.
Regular income from influencer activities?
Do you work with brands on a regular basis, actively seek commercial assignments and develop your activities on a professional basis? In that case, your income will generally be regarded as professional income.
In principle, this means you will have self-employed status, for example as a sole trader. Among other things, you will then need to register with the Crossroads Bank for Enterprises (CBE) and join a social insurance fund.
Your net professional income is taxed through personal income tax at progressive rates. Business expenses that meet the statutory conditions may be deductible. Examples include cameras and lighting equipment used professionally, software, certain subscriptions or travel expenses directly related to your assignments.
As a self-employed person, you also pay social security contributions on your professional income.
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What if you work as an influencer through a company?
Influencers who expand their activities may choose to operate through a company.
The income from collaborations will then accrue to the company. The company pays tax on its taxable profits. If you pay yourself remuneration as a company director, this will be taxed in your personal income tax and, in principle, you will be subject to the social security scheme for self-employed persons.
Whether a company is more advantageous than a sole trader depends on various factors. In addition to turnover, your profits, costs, investments and future plans are also important.
Does an influencer have to charge VAT?
Anyone who carries out economic activities on a self-employed basis is, in principle, liable for VAT. This means, among other things, that you must register for VAT purposes and that, depending on the applicable scheme, you charge VAT and file VAT returns.
There is, however, a VAT exemption scheme for small businesses.
This scheme is an option if your annual turnover does not exceed €25,000 excluding VAT and you meet the relevant conditions.
You remain liable for VAT and retain a VAT identification number, but in principle you do not charge VAT to your customers and do not have to file periodic VAT returns. In return, you cannot deduct the VAT on your own purchases.
If you start your activity during the calendar year, the turnover threshold may be reduced on a pro rata basis. It is therefore advisable to have the most appropriate scheme for your circumstances checked when you start your activity.
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Free products can also be taxable
A common misconception is that only money you receive as an influencer is taxable.
Suppose a clothing brand gives you a jacket in exchange for a video, or a hotel offers you a free stay in exchange for online exposure. No money changes hands but you do enjoy an economic benefit.
Such remuneration will also generally be regarded by the tax authorities as taxable income, in the same way as a monetary payment.
This is why keeping proper records is important. Before entering into a collaboration, set out what services you will provide, what remuneration you will receive in return, which products or services you will receive and what value is attributed to them.
Also make it clear whether goods are being given to you permanently or are merely being made available temporarily.
Products in exchange for advertising: what about VAT?
A barter deal sounds straightforward: a business provides a product and receives promotion in return. For VAT purposes, however, such collaborations can be more complex.
When an influencer who is liable for VAT provides advertising services in exchange for a product or service, there are effectively reciprocal supplies. Depending on the specific circumstances, both supplies may have VAT implications.
Even where a product is not given away permanently but, for example, only made available temporarily for a photoshoot, it is necessary to consider how the transaction should be treated for VAT purposes.
The correct treatment depends on the specific agreement. Particularly where collaborations involve significant value, it is advisable to determine the VAT treatment in advance.
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What do you need to arrange as a business when engaging an influencer?
Influencers are not the only ones with tax obligations. Businesses must also process collaborations correctly.
The first question is: under what status does the influencer operate?
Are you working with a self-employed influencer or a company? They will normally issue an invoice for the services provided. Where the VAT exemption scheme applies, no VAT will be charged.
If you engage someone as an employee, the usual social security and tax obligations associated with employment apply.
Different administrative rules apply to a genuinely occasional collaboration outside a professional activity. Depending on the amount and the specific circumstances, a 281.50 tax form may be required, among other things.
In other words, not every content creator should be treated in the same way.
Can you deduct influencer marketing costs?
For a business, expenditure on influencer marketing can in principle be deductible as a business expense if it meets the general tax conditions.
Among other things, the expenditure must be related to your business activities and you must be able to substantiate it properly.
It is therefore important to retain sufficient documentation, such as the agreement or briefing, invoices, proof of payment, evidence of the content or campaign delivered, and documents relating to products or services provided as remuneration.
A clear written agreement is therefore not only useful from a legal perspective; it also helps substantiate the business purpose and value of the collaboration.
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For certain payments to individuals who do not issue an invoice, you as the client may be required to issue a 281.50 tax form.
This may, for example, be relevant where someone provides a service only occasionally and doesn’t issue an invoice.
There are exceptions to the obligation to issue a form for certain small amounts. However, this does not automatically mean the income is tax-free for the recipient or that you, as the client, do not need to retain supporting documents.
The company’s obligation to issue a form and the tax treatment of the influencer’s income are two separate matters.
Don’t forget the advertising rules
In addition to tax matters, influencer marketing must also comply with the rules on advertising.
Commercial communications, where you as an influencer have been paid or received a benefit in exchange for the publicity provided, must be immediately and clearly recognisable as advertising to consumers. This does not just apply when an influencer receives money. A free product, discount, ticket, hotel stay or other benefit can also mean that a publication has a commercial nature.
Influencers should therefore clearly label advertising with an unambiguous indication such as ‘advertisement’, ‘ad’ or ‘publicity’. The indication must be clearly visible and must not be hidden among a series of hashtags.
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Influencer marketing? Clear agreements help avoid unexpected tax issues
A collaboration between a business and an influencer may seem straightforward: content in exchange for money, products or exposure. From a tax and administrative perspective, however, there can be many more implications.
For influencers, it is important to determine in good time when an occasional activity evolves into a professional activity. For businesses, a proper approach starts with checking the influencer’s status and properly documenting each form of remuneration.
Do you regularly work with influencers or earn income as a content creator yourself? Your PIA adviser will be happy to help you identify your tax and administrative obligations correctly.
