How can I claim my YouTube earnings?

Instagram, Facebook, YouTube: Do influencers have to pay taxes?

According to the “Instagram Rich List 2020”, some influencers earn around one million dollars per Instagram post. The top 15 earners include soccer players Lionel Messi and Christiano Ronaldo, but also parts of the Kardashian clan and actor Dwayne "The Rock" Johnson.

But you don't have to be an international superstar to earn money as an influencer on social networks like Instagram, Facebook and YouTube. Take Instagram, for example: Rumor has it that influencers with 40,000 followers can earn between 150 and 300 euros per post. The salary of an influencer with 600,000 followers is already 1,500 to 3,000 euros per post.

Sounds lucrative? Right. If you want to get behind or in front of the camera to start a career as an influencer, you should keep the following in mind: Influencers also have to pay taxes. Both for paid collaborations and for free products that companies send.

First step: register your business

The number of followers is increasing, the first requests for cooperation are being received, and free products are coming in. There is no clear definition of when a hobby becomes a job. But anyone who intends to make a profit should think about registering a business. To do this, go to the responsible trade office. A business registration costs around 20 euros, but the prices vary from trade office to trade office.

By the way:

Even if many influencers have artistic aspirations and thus freelance work would be possible, this is usually not an option in reality. Since influencers usually advertise and, for example, also earn money through affiliate links, only a commercial activity comes into question. An affiliate link is a link that an influencer sets to a company website. If a user clicks on the link and then buys a product or service, the influencer receives a commission.

Influencer income is taxable

Equal rights for everyone: whether employees or influencers, whoever has income - that is the income of one year minus expenses and allowances - that is above the basic allowance of currently 9,744 euros, has to pay taxes. In addition to income tax, influencers may also have to pay sales tax or trade tax.

Anyone who has income from non-self-employed work, for example, works in a company from Monday to Friday, and is only part-time as an influencer in the social networks, has an exemption limit of 410 euros for additional income. Income up to this limit is tax-free. However, sales tax may still have to be paid. The so-called hardship compensation applies between 410 and 820 euros: taxes are due, but not in full. The additional income only has to be fully taxed from 820 euros.

Income tax: income-surplus-account

As an influencer, in addition to the cover sheet of the tax return and other, individual attachments, you also have to fill out the EÜR attachment. EÜR stands for income surplus calculation. There you enter not only the income but also the expenses and thus determine the profit. The expenses include, for example, the costs for a hosting provider, but possibly also postage costs and specialist literature. Other equipment that influencers need for their job or even the office furnishings, on the other hand, cannot be easily removed, especially if the influencer activity is only a part-time job.

By the way:

The expensive digital camera or the brand new laptop are - if the tax office allows tax deductibility - usually so expensive that they have to be written off over several years. You also have to split the usage into private and professional. All information about this can be found in our article on the subject of depreciation.

Sales tax: The small business regulation applies up to 22,000 euros

In addition to income tax, influencers also have to worry about sales tax. Because the income generated is generally subject to sales tax. But there is an exception: the small business regulation. If the turnover in the previous calendar year was less than 22,000 euros and will probably not exceed 50,000 euros in the current calendar year, the small business regulation according to § 19 of the Sales Tax Act applies. The influencer thus benefits from some simplifications, for example he does not have to submit monthly sales tax returns. By the end of 2019, this sales limit was 17,500 euros.

If you want to waive the small business regulation or are above the limits, you have to show the sales tax on your invoices. This has the advantage that the influencer can deduct the sales tax shown there as input tax on invoices that they have paid themselves. This can mean hard cash, especially in the start-up phase. That means: If the amount of sales tax received is less than the amount of sales tax paid for purchases, money will be returned by the tax office. Regular VAT returns and a VAT return when the year is over are mandatory.

Important, as there are always confusions: Even if you are considered a small business owner, i.e. you do not have to pay sales tax, this does not release you from paying income tax!

Trade tax: Annual tax exemption of 24,500 euros

Last but not least, the trade tax. An influencer is generally also subject to trade tax because he operates a business. However, you only have to make a trade tax return if the profit is greater than 24,500 euros per year. If, on the other hand, you have made losses, a trade tax return must be submitted in any case.

How high the trade tax will be cannot be said across the board. Because it depends on how high the tax rate of the municipality is in which you registered your trade. The principle of business tax works as follows: The tax exemption amounting to 24,500 euros is deducted from the profit. The result is the reduced trade income after the tax exemption. From this you calculate 3.5 percent and thus get the tax assessment amount. This amount is multiplied by the municipal trade tax assessment rate. That sounds terribly complicated at first. A simplified numerical example brings clarity.

Julian is an influencer, lives in Frankfurt am Main and has made a profit of 25,500 euros. Since it just exceeds the annual tax allowance, trade tax is due. The calculation method:

  1. The allowance of 24,500 euros is deducted from the 25,500 euros profit. There are 1,000 euros of reduced trade income left after the tax exemption.
     
  2. The reduced trade income after the tax exemption is multiplied by 3.5 percent to determine the tax base:
    1,000 x 0.035 = 35 euros
     
  3. The tax assessment amount of 35 euros is multiplied by the municipal trade tax assessment rate - in the case of Frankfurt / Main 460 percent. The result is the trade tax to be paid.

35 euros x 4.6 = 161 euros

Julian pays 161 euros in business tax.

Excursus: Tax free products, that's how it works

When the parcel delivery company rings the bell regularly: Influencers and bloggers usually receive free products from companies that should test them and place them in the postings in a tactically clever way. What quickly looks like a gift is, in tax law, part of what is known as income in kind and has to be taxed.

This is regulated in Section 8 (2) of the Income Tax Act. There it says that all income that is not in money, with the "customary end prices reduced by customary discounts, are to be set at the point of delivery." For influencers and bloggers this means: If a free product arrives, first research the sales price in an online shop or in retail and make a note. This selling price is the income for this product.

Important: Even free hotel stays or trips are taxable as benefits in kind - at the price that you would normally have to pay for them.

By the way:

If influencers or bloggers sell the tested free products on on relevant platforms, this can be classified as commercial trade. Further information can be found in our article eBay & Co: Sales portals must disclose data.

Tax-free exemptions for free products

But there are also exceptions, i.e. free products that do not have to be taxed. This includes:

  • Advertising and giveaways with a value of less than 10 euros are tax-free. This is in a letter from the Federal Ministry of Finance on April 29, 2008.
     
  • A product that you have received without asking or only for testing for a certain period of time and that you return promptly is tax-free. By sending it back, it did not "flow into it economically", as it is called in official German.
     
  • If the company taxes the product at a flat rate, no taxes are incurred for the influencer - provided the product does not exceed a value of 10,000 euros. If the company sends several lump-sum taxed products to the influencer in a financial year, the total value must also not exceed 10,000 euros. Otherwise taxes will have to be paid.

The tax exemption applies at least to income tax. Sales tax may also be due.

Always document receipts

Important: All income - whether in the form of free products or sponsored posts - should always be clearly documented, for example in the form of an Excel spreadsheet. If you ask the tax office, you can then completely prove all income. Proof is extremely important, especially when a company applies a flat rate tax. Evidence can be, for example, a cooperation agreement or a written agreement. The complete proof of course also applies to all expenses incurred in the context of influencer activity.

Our tip: In summer 2020, the Bavarian State Tax Office published a guide for influencers (PDF). The guide answers frequently asked questions about the tax pitfalls that influencers should be aware of.

Note:

With influencers in particular, it is difficult to give a flat-rate answer to the question of the taxes due. Because each individual case has to be assessed individually. If you are unsure, you should seek help from a tax advisor before you risk fines or imprisonment for tax evasion. Income tax aid associations like the VLH are unfortunately not allowed to advise on income from self-employed work - not even influencers or bloggers. This is regulated by the Tax Advisory Act (advisory authority, § 4 No. 11 StBerG).

This is an editorial text from the VLH editorial team. There is no advice on topics that are outside the tax advisory powers of an income tax aid association. Consulting services in specific individual cases can only be provided within the framework of the establishment of a membership and exclusively within the advisory authority according to § 4 No. 11 StBerG.