Do you find it difficult to understand the twists and turns of the taxation of PR-gifts? If the taxation of influencer marketing makes you wonder, you have come to the right place. In this article you will find the updated information of the Spring of 2022 regarding the taxation of received products and examples of how you can suit these rules in practice.
Please take note, that as an influencer you have to follow the current rules and check the validity of the content. The up to date information can be checked from the tax administration.
Taxation of received products
All influencers are responsible to notifying and paying their own taxes to the administration. Influencers' taxable income includes the rewards received in money as well as rewards received for example in the form of goods, services or gift cards. The influencer can receive product samples, PR gifts, model pieces, novelty products, discounts, gift cards, trips, hotels and tickets for experiences from partner companies.
The general rule is that taxes must be paid on all goods and services received. An exception to this is a receved product, service or monetary benefit that has a value of less than 50 euros (incl. VAT), and if while receiving this gift there hasn't been an agreement on a reward for visibility or a collaboration. If a product, service or benefit has been received in exchange for social media visibility, the fair value of the gift is taxable income, even if it is worth less than 50 euros. (vero.fi)
The tax on product gifts, benefits and other similar compensation is calculated from their fair value. The fair value is the same as the price of the product or, for example, the entrance ticket, if you would buy the product or ticket yourself. (vero.fi)
In taxation, the influencer can deduct the costs of acquiring them from their income. This can be, for example, the fair value of the received product or monetary benefit completely or partially.
Responsibility of the sender of PR-gifts
Every company and operator should always ask for permission to send the influencer any shipment of monetary value, as taxation is not affected by whether the influencer has agreed on receiving the product or service in advance with the sender. (Sometulot – vero.fi)
Since the products or services received may have an impact on the influencer's taxation, it is important for the influencer to know what is being sent to them. Also, it is important that the influencer finds out the fair value of the product from the sender or can find it out themselves.
Tax notice of PR-gifts
The influencer must notify the fair values of gifts of goods, trips, gift cards and admission tickets on the tax return as follows:
- An individual completes the income on a pre-filled tax return
- A sole trader declares the income with a business activity tax return by April 1st
- A joint-stock company declares it's income with a joint-stock company's tax return
For tax audits, the influencer must keep all receipts and other evidence of the value of the product or other monetary benefit for 3-6 years after the taxation has ended.
Instructions on the income register for the influencer
The income register is an electronic database where information about paid wages, bonuses and benefits is reported. The giver of a product gift is obliged to report the product gift to the taxman in the income register, from which the income is allocated to the beneficiary based on the declarations.
The influencer can view the entered information from the electronic transaction service and check that the income has been entered correctly in the tax return and complete and correct it if necessary. (vero.fi)
If you receive gifts from the same gift giver with a total value of more than €5,000 within three years, you must also declare all gifts with a gift tax declaration, in addition to the gift recipient. (vero.fi)
Examples of the taxation of received products
PR-gift: cosmetic product package
The influencer receives a package of cosmetics worth of 45 euros from a company. There is no cooperation behind the sent cosmetics package: it is not a compensation for cooperation or requiring visibility from the influencer. The influencer can receive the shipment without tax consequences.
The influencer receives 99 euro headphones from a company. The influencer declares the fair value of the headphones in the tax return and deposits receipts and certificates for the fair value of the headphones for a period of 3–6 years after the end of taxation.
The influencer may be able to deduct the expenses incurred for acquiring them from their income either in whole or in part, i.e. in this case the value of the headphones.
The influencer is invited to a company's PR trip, where the company offers the influencer flights and a hotel night (value 500 euros). In the tax return, the influencer declares the fair value of the trip, including information about all factors included in the price of the trip (flight and hotel), and deposits receipts and certificates for the fair value of the trip for 3–6 years after the end of taxation.
The influencer can possibly deduct the costs of acquiring them from their income, i.e. in this case the travel expenses, because the influencer creates content for their channels during the trip and creates relationships with the client company, i.e. does their job. The influencer can declare the amount of the fair value of the entire trip received as an income deduction in the tax return.
The influencer receives a free festival ticket from a company with a value of 180 euros. The influencer declares the fair value of the admission ticket in the tax return and deposits receipts and certificates for the fair value of the ticket for 3–6 years after the end of taxation.
The influencer may be able to deduct the expenses incurred for acquiring them from their income, in this case the expenses of the ticket. The influencer participates in the festival weekend and spends half of the time creating content for their own channels, creating relationships, meeting partners and filming material. After working, the influencer switches to free time. Therefore, the influencer can possibly declare half of the fair value of the ticket he received as an income deduction in the tax return.
The influencer receives a discount code from a company, which the influencer can use to buy products at a reduced price. "If the discount is customary and reasonable and can be compared to the discount given to customers, it is allowed without tax implications. A discount is customary and reasonable when it is at most the same amount as, for example, the discount granted to retailers or the best customers. In that case, the amountof euros of the discount is irrelevant." (veronmaksajat.fi)
If the influencer receives a discount from a company, with which the influencer can buy, for example, products at the buy-in price, the influencer declares the fair value of the received benefit in taxation.
Can the influencer give uo received PR gifts?
The influencer has the freedom to sell or donate the received products.
A professional influencer acknowledges the fact that they sell or donate the product obtained through cooperation only after a reasonable period of time after the implementation of the cooperation. After a reasonable time, the products can be sold or donated, unless otherwise agreed with the advertiser.
Reselling received gifts and products
If the influencer receives product shipments and resells the unnecessary and unused products, tax must be paid on the sale profit. However, the tax must be paid only when goods and other movable property are sold for a total of more than 1 000 euros per year. The limit of 1 000 euros is calculated from sales prices, not sales profits. If the sales prices exceed the 1 000 euro limit, the profits are fully taxable capital income. (vero.fi)
If the influencer first uses the product themselves or it will be used by the influencer's family, the influencer can sell used goods tax-free if the profits from the sale are less than 5 000 euros per year. If the influencer receives capital gains of more than 5 000 euros in a year, capital gains tax must be paid on the part that exceeds the limit. Profit refers to the difference between the selling price and the fair price. (vero.fi)
Please note that these instructions apply to ordinary household movables: apartments, cars are not ordinary household movables. In addition, the continuous, professional sale of goods is a business activity, which is declared with a business tax return. The business is subject to VAT liability when the turnover is over 15 000 €. (vero.fi)
Ordinary movables can include:
- house electronics
- hobby tools
Ordinary movables do not include:
- other equivalent means of transport
Remember to inform about the deductions for income generation in taxation
The influencer can deduct the expenses that have been caused by obtaining income in taxation, i.e. doing the work of the influencer. This can be, for example, the fair value of the received product or monetary benefit in whole or in part. If there are more expenses than income in a certain year, the influencer can deduct the expenses from the influencer income of the following years. All private persons automatically receive an income-earning deduction of 750 euros (in 2022). Income-earning expenses should therefore only be reported if they exceed 750 euros. (vero.fi)
The most common revenue deductions for an influencer are:
- Phone and connection
- Internet connection
- Camera and other filming equipment
- Softwares, such as photoshop etc.
- Cloud storage
- Products bought for the collaboration
- Accounting expences
A deduction is not granted for occasional use: if you need the computer to perform work tasks, you can get a deduction of half the price of the computer. If the computer was purchased mainly for work use, the deduction is received in full.
What can happen if correct information is not provided to the tax authority?
1. Tax audit
The influencer can be subject to a tax audit, which proceeds according to the normal processes of a tax audit. The tax audit also requires time, work and preparation from the influencer, so it should be avoided by always taking care of tax matters in advance.
The tax audit thoroughly investigates whether the Tax Administration has been given the correct and sufficient information so that taxation can be submitted in accordance with the law and the customer's obligation to pay tax is fulfilled. The tax audit focuses on accounting and other written material, such as contracts. In the case of the influencer, cooperation agreements and received PR gifts and trips could be processed. The tax audit usually examines the correspondence between the business and the accounting: whether the declarations given to the Tax Administration correspond to the accounting and whether the tax legislation has been complied with. (vero.fi)
2. Residual tax
If the influencer has paid too little taxes during the year, the missing part must be paid as residual tax. Default interest accrues on late residual tax, paying on time avoids default interest. (vero.fi)
Indieplace's influencer team is here for you - if you are wondering about the taxation of influencer marketing, do contact us!