Tax basics: The taxation of influencers (value added tax)

In addition to the special income tax features that influencers, streamers, YouTubers and bloggers (hereinafter referred to as influencers) must take into account, the topic of VAT is also of great importance. In the second part of our Tax Basics series, we therefore look at the services provided by influencers and their VAT treatment.

I. Fundamentals

When is an influencer considered an entrepreneur within the meaning of the German VAT Act?
An entrepreneur is anyone who carries out a commercial or professional activity independently. Any sustainable activity to generate income is considered a commercial or professional activity. The intention to generate income is sufficient for this. In contrast to income tax law, where the intention to make a profit is a prerequisite. Therefore, entrepreneurial status under VAT law can also exist in the case of a hobby for income tax purposes. Influencers who meet the requirements for entrepreneurial status are to be regarded as entrepreneurs for VAT purposes.
 
When does a sustainable (economic) activity exist?
The following criteria in particular are decisive for assessing whether a sustainable activity exists: 
  • Activity with the intention of repetition
  • planned action,  
  • Execution of more than just a turnover, 
  • Performing several similar acts using the same opportunity or the same permanent relationship, 
  • Long-term toleration of interference in one's own legal sphere
  • Intensity of activity,
  • Participation in the market 
  • Act like a trader
  • Maintaining a business premises.
Influencers may already be deemed to be engaged in entrepreneurial activity if the intention is to receive payments in the future by uploading and sharing content and to repeat this activity on a regular basis.
 
What is the small business regulation for VAT purposes and does it apply to influencers?
If the turnover of an entrepreneur in the current year or year of foundation does not exceed €22,000 and the turnover limit of €50,000 is not expected to be exceeded in the following year, the entrepreneur can be treated as a small business within the meaning of Section 19 UStG. This is also possible for influencers. 
 
This eliminates the obligation to submit advance VAT returns and, since 2024, the obligation to submit an annual VAT return. However, you lose the right to deduct input tax from incoming invoices. If the above turnover limits are exceeded in one year, standard taxation is automatically applied.
 
It is possible to waive the application of the small business regulation. If the waiver is declared, the influencer is treated as a regular taxable entrepreneur and must show VAT on the revenue invoices, but is also entitled to deduct input tax on incoming invoices. This can be advantageous under certain circumstances if the influencer expects to receive larger incoming invoices with input tax deduction. The waiver of the small business regulation pursuant to Section 19 (2) sentence 2 UStG binds the taxable person for at least five calendar years. 

II Supplies and other services of an influencer and their location

Influencers, YouTubers and bloggers generally provide various services. Even services that initially appear to be tax-free can be subject to VAT, such as the free provision of product samples and benefits in kind. In order to avoid VAT consequences and additional tax payments in the event of a subsequent tax audit, it is advisable to consider each service individually in order to be able to classify them correctly. The correct classification has an impact on the determination of the place of performance and the resulting tax liability. 
 
If the place of other services or deliveries is in Germany and these are taxable and not tax-exempt, the turnover is generally subject to VAT of 19%, which must be shown separately on the invoice. 
 
Below we provide an overview of possible services and their VAT assessment. 
 
  1. Profit sharing in advertising revenue from video platforms
    By creating and uploading videos to video platforms such as YouTube, YouTubers generally generate income through profit sharing in the revenue that the platform collects from advertisements. The activity is regarded as a self-employed sustainable activity with the intention of generating income, even if it is only uploaded once with the intention of generating advertising income in the future by regularly calling up third parties.

    The granting of permission to play advertisements on the channel constitutes a supply of services within the meaning of Section 3 (9) UStG. According to Section 3a (2) UStG, the place of performance is where the recipient of the service (video platform) has its registered office or economic activity (recipient location principle).

  2. Blogger posts
    Writing and uploading written and video posts also often generates income by placing advertisements and links in the post that lead to other companies. As a result, bloggers and vloggers regularly generate income from advertising services.
    The granting of permission to play advertisements on the channel constitutes other services within the meaning of Section 3 (9) UStG, the place of performance of which is the registered office of the recipient (company) in accordance with Section 3a (2) UStG.

  3. Entertainment and entertainment services
    Streamers often also provide entertainment and entertainment services to their viewers and followers. These services are also subject to VAT as other services. However, a precise distinction must be made here as to whether the streaming platform or the streamer is the supplier of services to the end consumer. A precise examination of the contracts and contractual relationships with the streaming platform is therefore essential. According to the case law of the European Court of Justice, a service commission exists if electronically provided services are provided via a portal, an interface or a telecommunications network. As a result, the platform operator is to be regarded as a service provider to the end customer.
    The streamer provides other services to the platform operator and the place of performance is the registered office of the recipient in accordance with Section 3a (2) UStG.

  4. Sale of own products
    If own products such as cosmetics, food, fashion and sporting goods are sold, this constitutes a supply.
    In accordance with Section 3a (6) UStG, the supply is deemed to be carried out at the place where the dispatch begins. This will usually be the registered office or place of residence of the influencer. In the case of a shipment from Germany, the delivery is subject to VAT at a rate of 19%.
    If the delivery is made to an entrepreneur based abroad, it must be checked whether a VAT-exempt intra-Community delivery or export delivery exists.

  5. Provision of product samples and benefits in kind
    Influencers often receive product samples and benefits in kind (e.g. fashion, sports and cosmetic articles, technical devices) from companies in return for advertising services. The acceptance of such products leads to business income for the influencer and constitutes a transaction similar to an exchange within the meaning of Section 3(12) sentence 2 UStG.

    In the case of barter and barter-like transactions, the value of each transaction is deemed to be consideration for the other transaction. The value of the other transaction is determined by the subjective value of the consideration actually received and expressible in monetary terms. The subjective value is the value that the recipient of the service attaches to the service that he wishes to obtain and whose value corresponds to the amount that he is prepared to spend for this purpose (see BFH ruling of April 16, 2008, XI R 56/06, BStBl II p. 909, and ECJ ruling of June 2, 1994, C-33/93, Empire Stores). The assessment basis for VAT is therefore based on the subjective value of the advertising service received.
    The advertising service therefore constitutes a supply of other services to an entrepreneur, the place of supply of which is the registered office of the recipient of the service in accordance with Section 3a (2) UStG.
    Such VAT consequences can be avoided if necessary by returning the product sample after testing.
     
  6. Donations
    Donations are voluntary donations made by viewers to the influencer during live broadcasts using special donation software.
    With regard to the taxation of donations, it is not yet clear whether these are to be regarded as remuneration for a service provided by the streamer in the VAT sense, as viewers sometimes receive benefits such as earlier or limited access to content on the website. However, a causal link between performance and consideration has been affirmed by case law. Here we also refer to our blog post from 10.01.2024 "Donations in the area of video and streaming platforms and their VAT treatment (as of 9/2023)". The monetary donation to the streamer represents a direct consideration from the viewers for the maintenance service provided by the streamer.
    The place of performance is determined in accordance with Section 3a para. 1 UStG and is the registered office of the entrepreneur providing the service, i.e. the influencer. A determination of the place of supply in accordance with Section 3a (5) UStG is not possible as the supply is not fully automated.

  7. Benefits in the form of "bits"
    In addition to donations, streamers also have the option of generating income through benefits in the form of bits, a type of virtual commodity. The bits are purchased by the viewer via the video platform.
    The granting of bits represents consideration for the streamer's entertainment services and is subject to VAT. However, the exchange of services takes place between the streamer and the operator of the video platform.
    The service commission constitutes a miscellaneous supply to the video platform, the place of which is the registered office of the recipient of the service in accordance with Section 3a (2) UStG.

III Special features of service relationships with foreign companies and private individuals

If other services are provided to an entrepreneur based abroad, a case-by-case assessment is highly advisable. If the place of performance is abroad, the other service is not taxable in Germany. However, it must be checked whether VAT registration may be required abroad and whether VAT must be paid there or whether the reverse charge procedure applies and the tax liability is transferred to the recipient of the service. A reference to the reverse charge procedure and a VAT ID number must be included in the invoice.
If other services are provided to a private individual, the reverse charge procedure cannot be applied and VAT registration abroad may be necessary. However, it is possible to check whether the sales can be reported to the respective countries via the Federal Central Tax Office as part of the one-stop store procedure (OSS).
If a domestic influencer receives other services from an entrepreneur based abroad, it must also be checked whether the reverse charge procedure applies and the tax liability is transferred to the influencer as the recipient of the service (Section 13b UStG). If this is the case, the influencer must pay the VAT on the services received in Germany. The influencer must also pay the VAT in the reverse charge procedure if the small business regulation applies to them.  
Furthermore, if services are provided to foreign entrepreneurs, there may be an obligation to submit a recapitulative statement (ZM) to the Federal Central Tax Office. If the recapitulative statement is submitted late, a late payment surcharge may be imposed, which may amount to up to 1 percent of the total of all assessment bases to be reported in the recapitulative statement, up to a maximum of € 2,500 (Section 18 a (11) sentence 2 UStG in conjunction with Section 152 AO). If a VAT return is intentionally or recklessly not submitted, not submitted correctly, not submitted completely or not submitted on time, this can also be punished as an administrative offense with a fine of up to € 5,000 (Section 26 a UStG).
 
In the next part, we will discuss the BFH ruling of 12.6.2019 (X R 20/17, BStBl. ll 2020, 3) with regard to depreciation on the commercializable part of the name/personal rights.
 
If you have any questions or require further information, please do not hesitate to contact us on 02204 9508- 100.
Peter Biegler
Dipl.-Kfm., tax consultant | Website | + posts