Tax Law for Influencers
Being an influencer is not only increasingly recognized but also increasingly aspirational for many younger people. And indeed influencers can earn quite well. But it’s important that influencers have to pay taxes like everyone else, otherwise they have to face investigations and punishments. Many people do not know what counts as income for influencers and has to declared in your income tax – or that a tax declaration has to be written at all. If you are or want to become an influencer, I will gladly answer the most important tax law questions for you in this article. If you have further questions or would like a consultation, please contact me.
Tax law for influencers: Which taxes apply to you?
There are different kinds of taxes that each have to be declared separately. For influencers, the relevant kinds are income tax, which taxes all income regardless of source; value-added tax, which only taxes income from a specific long-term occupation; and possibly also business tax, which only applies to businesses and only over a specific income.
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Income tax: Income tax has to be paid when the personal exemption is surpassed by all income from all sources added together. So if you are employed in addition to being an influencer, you add both incomes together. Important: if you have income from two or more sources in one year, you have to write an income tax declaration even if you stay under the personal exemption!
Value-added tax: Value-added tax has to be paid when you pursue long-term income (so not just single payments) through a specific occupation, for example through regular sponsorships, through selling your own products, or through memberships. Important: you should mind the small business clause! If you gain less than 25.000 euro a year as an influencer, you can be treated as a small business and don’t have to pay or declare value-added tax, though you then also can’t subtract input tax.
Business tax: For income from your influencer career over the specific sum of 24.500 yearly you additionally have to pay business tax. Important: A business also has to be registered! You don’t need a permission, but you have to inform your local business office that you now run a business, that is, that you work as an influencer now. Otherwise, you may be fined. Depending on your income you have to write an income tax declaration, possible a valueadded tax declaration and if things are going well also a business tax declaration.
Influencers and sponsors in tax law: What counts as income?
Money for services such as reviews or advertising is a classic income. But many influencers are paid not only in money by their sponsors, partners and clients, but also so called moneyequivalent benefits: free products or services. Money-equivalent benefits also count as income. Clothing that should be tested or advertised but can be kept afterwards counts as taxable income, as do free hotel stays, travel arrangements or other services such as stylings or massages. To declare everything correctly, the market value has to be determined: the costs that someone else would need to pay for it. This value is then put into the tax declaration. For that reason, it’s important to document precisely what you received when from whom, and ideally to always add immediately what it would have cost. The more precisely you document this over the year, the easier the tax declaration will be in the next year.
Income from advertising, provisions through affiliate links, sales of products such as merch, as well as money from “donations” and “memberships” on platforms like YouTube, Twitch, Instagram or Patreon have to be declared as income. There you should also document regularly how much you are earning.
Expenses for influencers can be declared in tax law
You should document your expenses just as precisely, as many business expenses such as material or travel costs, but also hosting or membership costs for websites or platforms and other expenses necessary for your influencer business can be declared as professional expenses in your tax declaration. This can lower your tax burden, so you will pay less in taxes. Keep all your invoices carefully.
By the way: the costs for a tax consultant can also be declared as professional expense.
Tax law for German influencers outside of Germany
Many influencers move out of Germany to enjoy better weather or maybe also save taxes. But moving out alone doesn’t end German taxation. You have to decide whether you still want to be unlimited taxable in Germany, only limited taxable, or whether you want to fully free yourself of German taxation. If your taxation is unlimited, you still have to pay German taxes on all of your income unless it has already been caught by a double taxation agreement. That means it doesn’t matter where your income comes from, it is taxed by Germany. In exchange you can benefit from the personal exemption and other tax benefits. From outside of Germany you have to apply to remain unlimited taxable and the majority of your income has to come from Germany. If your taxation is limited, only German income or income with a connection to Germany is taxed by Germany. All other income is taxed by the country you live in. In that case the personal exemption and other German tax benefits don’t apply, and you can only declare professional expenses for your German income. This limited taxation applies automatically when you don’t have a German home, spend less than 183 days a year in Germany, but still have German income. Simply registering in another country isn’t enough to abandon a German home – you can’t have unlimited access to a German address anymore, not even as sub-rented holiday home.
If you have German citizenship, lose your unlimited taxation status by moving away into a country with lower taxation, and still have financial interests in Germany, the foreign tax act additionally applies and extends your limited taxation. Then you have to also pay German income tax on interest from German banks and similar income for ten years, in addition to your normal limited taxation.
Shares and capital interest is also taxed one last time through moving away taxation when you leave Germany, so you should pay attention to that as well when you move out. With a little preparation and perhaps a tax consultation all the obstacles to moving out can be overcome.
How do I fully free myself form German taxation?
To totally free yourself from German taxation you have to give up nearly every connection to Germany. That means that you have to qualify for limited taxation and then can’t have any income that would be taxed by Germany, so no income that is connected to Germany. You can no longer receive income from German companies, can’t rent out anything in Germany, etc. Only this way can you fully avoid German taxation.
What happens with missing or incorrect tax declarations?
If you don’t declare and tax your income completely, a proceeding for tax fraud can be instituted against you. That means that the tax office investigates you to determine whether you have evaded taxes. First you will receive a letter that invites you to comment and explain your financial and tax situation to the tax office. If the investigation finds that you have paid too little taxes, you will have to pay the difference and can additionally expect fines – for large-scale tax evasion you might even have to expect a prison sentence.
What happens with missing or incorrect tax declarations?
If you don’t declare and tax your income completely, a proceeding for tax fraud can be instituted against you. That means that the tax office investigates you to determine whether you have evaded taxes. First you will receive a letter that invites you to comment and explain your financial and tax situation to the tax office. If the investigation finds that you have paid too little taxes, you will have to pay the difference and can additionally expect fines – for large-scale tax evasion you might even have to expect a prison sentence.
How long is a self-report possible?
If no investigation has begun against a specific person yet – if no letter has arrived yet – you can still self report with exemption from punishment. That means that you won’t be punished at all. But even if an investigation has already been opened, a full self-report can still reduce the punishment even in ongoing proceedings. Even then it is not too late to explain yourself and prevent higher fines that way.
You have questions or need assistance? Contact me without any obligation. You have questions around tax law for influencers, have already received a letter from the tax office, or want to self-report? Please feel free to contact me. I will give you a first estimation of your case for free and will gladly support you in your contact with the tax office.
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