Further authors and contact persons: inside: Dr. Anne Schäfer, Marco Strootmann, Anastasia Podolak
The tax authorities are targeting influencer marketing. Authorities in several federal states are currently investigating professional influencers on suspicion of tax evasion, including the State Office for Combating Financial Crime in North Rhine-Westphalia (LBF NRW).
The authorities assume that a large number of influencers have not properly taxed their income in Germany or wanted to avoid taxation in Germany by moving abroad. The estimated tax loss in North Rhine-Westphalia alone amounts to 300 million euros. Influencers face heavy fines and even prison sentences.
All influencers should immediately check whether income is subject to tax in Germany and consider filing a voluntary disclosure for undeclared income. And importantly, it is not only cash income that is taxable, but also benefits received and benefits in kind may be taxable.
Companies that have worked with influencers should also be prepared. This is because they could also be contacted by the tax authorities.
Tax obligations of influencers
The range of potentially evaded taxes is colorful: income tax, VAT, wage tax and withholding tax could have been wrongly not paid.
Income tax and trade tax
As a rule, both income tax and trade tax are payable when working as a content creator. Even if influencers do not receive any money but, for example, are only allowed to keep the tested products or take trips at the expense of the client, such benefits in kind must be taxed. Deviations from this can arise, for example, if the companies take over the taxation of the benefits in kind. In this case, close coordination between the influencer and the client is recommended.
Value added tax
Influencers are also regularly subject to VAT if they exceed the turnover of a small business. This is the case if the total turnover generated in Germany exceeds EUR 25,000 in the previous year and EUR 100,000 in the current year. Here too, benefits in kind such as travel, hotel accommodation and products received are included in turnover.
The particular challenge lies in determining the correct assessment basis: this usually includes not only the cash payments received, but also the value of products received such as gifts and goodie bags or other services such as travel, hotel accommodation and invitations to events.
Detailed knowledge of the contractual relationships and the actual structure is crucial for a correct VAT classification.
Withholding tax
If influencers are resident abroad for tax purposes, German withholding tax may be due on certain remuneration from a client resident in Germany. This may include, for example, remuneration for appearances or video shoots in Germany or payments for the use of influencers’ name and image rights.
Relocation abroad does not automatically protect against tax liability
Some influencers have moved their place of residence abroad. However, a tax liability may still exist in Germany if the person still has a place of residence or habitual abode in Germany, i.e. if they spend more than 183 days in Germany, for example. And: even those who are clearly only resident abroad for tax purposes may still be liable to pay tax on certain income in Germany, for example due to the above-mentioned withholding tax.
Influencers should act immediately
Anyone who has not yet fully declared income or benefits in kind in their tax return may be liable to prosecution for tax evasion. High fines and even imprisonment are possible. The purchase of tax CDs from Switzerland has shown that the tax authorities can quickly achieve investigative success from large amounts of data.
In our opinion, the press release from the LBF NRW can be understood as a final call to action for influencers and thus as a “golden bridge” back to tax honesty. There is therefore an acute need for action. Undeclared income and turnover from influencer activities should be declared immediately.
Structuring such a subsequent declaration as a voluntary disclosure can prevent or at least minimize criminal sanctions. If the cases are uncovered by the tax investigators themselves and preliminary proceedings are initiated, it is too late for a voluntary disclosure. There is also the threat of searches, monitoring of activities on social media and questioning of clients.
If criminal proceedings have already been initiated, a defense strategy should be developed in cooperation with experts in criminal tax law in order to effectively counter the measures taken by the investigating authorities.
Clients of influencers can also be targeted by the authorities
As part of their investigations, the authorities can also contact the influencers’ clients, i.e. the agencies or companies, and ask them for information. In such a case, companies should definitely check the legality of such requests.
Companies are liable for the correct deduction and payment of withholding tax in connection with influencer marketing. If these have not been paid in full by the German clients, they may also be accused of tax evasion or tax avoidance.
In addition, clients should check for which cases flat-rate taxation of non-cash benefits to influencers is required. Flat-rate taxation is only permitted or required for gifts for which no contractually agreed consideration is provided by the influencer. As soon as the non-cash benefit is related to a specific advertising service or posting, it is usually taxable by the influencer themselves. Clients should therefore carefully check in each individual case whether the requirements for flat-rate taxation are actually met.
What to do with regard to the current tax investigation
The current manhunt and the targeted analysis of social media data significantly increase the risk of detection. We therefore strongly recommend
- immediately carry out a tax inventory,
- to document all income and turnover, including from benefits in kind and foreign sources,
to examine the possibility of a voluntary disclosure exempting from prosecution and
- report undeclared income to the tax authorities and pay back taxes and any interest.
KPMG Law has a nationwide team of specialized criminal tax lawyers with many years of experience. Together with tax experts from KPMG AG Wirtschaftsprüfungsgesellschaft, we are happy to support you in implementing a strategy, even at short notice.
Further authors and contact persons:
Dr. Anne Schäfer, Partner, Tax, Corporate Tax Services, KPMG AG Wirtschaftsprüfungsgesellschaft
Marco Strootmann, Partner, Tax, Wage Tax Services, KPMG AG Wirtschaftsprüfungsgesellschaft
Anastasia Podolak, Senior Manager, Indirect Tax Services, KPMG AG Wirtschaftsprüfungsgesellschaft
Detailed information on tax liability in the context of influencer marketing can be found on the KPMG topic page on tax issues when working with influencers.
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