Influencers, tax and social contributions – companies advertising through them shouldn’t underestimate the risk either

Influencer marketing under scrutiny by the authorities

Collaboration with influencers – influencer marketing – is a form of social media marketing. This uses an influencer’s reach and community for marketing purposes as part of a paid cooperation. These campaigns mostly take place on platforms like Instagram, TikTok, YouTube, etc. 

The advantages of this form of marketing are:

• authenticity
• proximity and interaction
• customer retention
• the subtle impartation of market messaging
• reach
• visibility

In such campaigns, companies usually gift an influencer various benefits in kind – trips, invitations and tickets to events, free products, etc. This also has consequences for tax, which not all those involved are always aware of.

For this reason, the tax authorities in various federal states have already formed special public task forces dedicated to investigating everything concerning influencers. This puts influencers right in the authorities’ focus.

It cannot be ruled out that after the current investigations are concluded a “second wave” will begin that will not just be limited to the influencers themselves but will also set its sights on their business partners, i.e. the companies that use influencers for marketing and advertising purposes or including the agencies that bring the influencers and companies together.

Alongside the consequences for tax, many companies forget the consequences for social insurance, which can be relevant when engaging influencers. The Artists’ Social Fund (Künstlersozialkasse) also considers the work of influencers as artistic activity, which can establish a liability to pay social insurance contributions. Failure to comply may result in liable companies having to pay high fines.

For this reason companies and agencies should take the opportunity to examine their processes involving collaboration with influencers and give them a compliance check.

The areas that should be considered in particular are:

• payroll tax related to the payments made
• VAT and input tax
• withholding tax
• social insurance and the Artists’ Social Fund (KSK)

Reviewing the processes currently in place or quickly implementing new processes offer the chance to correct errors and optimise internal processes. 

Ideally, processes that are well set up and documented can be presented at a tax audit. 

This not only goes along with risk mitigation and optimisation of processes within the company but also a chance for management to avoid liability.

Payroll tax

As described above, the tax authorities are currently focusing on influencers and their income. These persons are only very rarely employees of the company doing the advertising – although this may be different for the particular category of corporate influencers. 

So the question arises to what extent the topic of payroll tax is then at all relevant to the company advertising. This is where the flat rate provision of section 37b(1) of the Income Tax Act (Einkommensteuergesetz) comes into play. 

This provision, in the form of an option, allows gifting companies to pay the income tax for payments to non-employees. This option is to be exercised uniformly for all payments to non-employees (i.e. independently of the circle of influencers) for the whole calendar year. If section 37b(1) of the Income Tax Act is applied, recipients of payments are to be informed of this because they then don’t need to declare and pay tax on this income themselves.

But the provision has further prerequisites, which is why it must be checked on a case-by-case basis what has been gifted to the influencer and what has been contractually arranged.

Simply put, if the payment is already part of the contractually agreed services, section 37b(1) can’t be applied and the influencer must declare and pay tax on the payment themselves. The same applies if the individual payment exceeds the threshold or to the extent that total payments exceed the allowance of €10,000 per recipient per calendar year.

Here, the scope of the flat rate provision must always be examined first. If the case concerned doesn’t fall within it or if the prerequisites are not met, the company advertising may not pay the payroll tax. If it does fall within it, errors may be made in calculating the value of the benefit received. The principle applies here that just because the payment doesn’t cost the company anything doesn’t mean that the benefit is of zero value. 

There are some other pitfalls, too, particularly if there is no contractual relationship between the influencer and the company advertising because an agency stands between them.

It is recommended to examine this individually (contrary to the general tendency towards standardisation and automation) in order to ensure tax compliance.

VAT

With VAT, too, in the context of marketing services related to influencers, but also that of sponsoring and incentives, the question always arises “who provides what to whom?” 

Only when it is clear to all those involved that a service is being provided and what exactly each party provides to the other parties can the service to each party be correctly categorised for VAT. 

Influencers typically provide an advertising service to the company in question or also to an intermediate agency. In return, they receive a cash payment and/or goods or an advertising service from the company. The same typically applies to sponsoring. 

It is worth mentioning the risk in practice that no invoices are issued. In exchanging services with each other, with or without any additional cash payment, the exchange is often not recognised as being relevant for VAT. In most cases, barter deals do not typically involve any payment since the value of the service is paid off by the service in return. Nonetheless, both parties are obliged to show properly how it was taxed and to declare VAT or input tax correctly to the tax office. The trouble with these cases is that it is when an exchange of services goes unrecognised that no invoice is issued and no entry is made in the books. Without agreeing a payment it may not even seem necessary to the parties to issue an invoice at all. The consequence of this is that without any record, in the worst case it won’t be entered in the books.

For this reason querying VAT processes in sales and marketing is one of the standard queries in tax control framework projects. 

What is noticed here, it that the onboarding of influencers, sponsoring of partners and incentive processes are often only given cursory attention. The questions to ask here include:

• Are influencers in particular subject to close scrutiny (entrepreneur, registered office, tax number, etc.)?
• Have the contracts and conditions agreed in them been checked by the tax department? When there is a mix of goods levies, advertising, licence use and additional payments, it is often difficult to present this correctly; the non-taxable free use of goods and services is often included, which makes distinguishing them even more difficult.
• Is it checked whether invoices are issued correctly on both sides and correctly entered into the books?

As already mentioned, it can be expected that the tax authorities will be  examining influencers at companies more closely, but also sponsoring, incentive services to third parties and employees and barter deals. 

Withholding tax

To increase brand awareness beyond the German market many companies are now collaborating with international influencers. But when the influencer is resident abroad, another frequently underestimated subject immediately pops up: withholding tax under German law.

The principle is that if an influencer who doesn’t have residence or habitual abode in Germany makes domestic income (section 49 of the Income Tax Act), he or she is subject to non-resident taxation. This can include, for example, sponsored posts during a stay in Germany, a livestream from Germany or appearing at an event. The same applies if rights to images or names are licensed to German companies or content rights are transferred as part of brand partnerships.

The particular feature of this is that these rules not only affect the influencer himself but also have a direct effect on the commissioning company. This is because tax deduction applies. Practically speaking this means that the German commissioning company is liable to deduct tax on behalf of the influencer, to withhold 15.825% and to declare and pay the tax to the responsible tax office (the Central Tax Office [BZSt]).

If a double taxation agreement (DTA) exists with the influencer’s state of residence, it may be possible to reduce or prevent the tax liability, e.g. if the DTA lays down that the liable payments may not be taxed in Germany or at a different tax rate. This is only possible, however, by presenting an exemption certificate that must be applied for in advance or subsequently as part of a refund procedure. Owing to the long processing time at the Central Tax Office (BZSt) (at least 1 year) collaboration would therefore have to be planned very far in advance, which is untypical, in order to allow the influencer to obtain an exemption certificate beforehand. Otherwise the only other option is a subsequent refund procedure.

If there is no DTA with the influencer’s state of residence, such as when the influencer is resident in Dubai, the tax is collected finally.

This exposes companies to a considerable risk of liability:  If tax is not deducted, the company is liable for the unpaid tax. There are also practical challenges – e.g. determining the actual place where the content is created, or dividing up flat fees into service and royalty components.

Conclusion: those who work with international influencers should check their tax duties at an early stage and lay down clear contractual rules. This allows liability risks to be avoided, and unnecessary tax liabilities reduced.

Social insurance and the Artists’ Social Fund (Künstlersozialkasse)

The Artists’ Social Fund (KSK) has the purpose of offering self-employed creatives similar insurance cover to dependent workers. It is designed to be similar to the social insurance of employees. The insured must only bear 50% of the contributions themselves; of the other 50%, 30%  is borne by the exploiting party (usually a company) and 20% by the federal government.

Most companies are not aware, however, how quickly they become the “exploiting party” and that they therefore have a duty to pay contributions to the KSK. The legal basis is found in the Artists’ Social Security Act (Künstlersozialversicherungsgesetz – KSVG). The scope of those liable is given by section 24 KSVG. There is both a list of typical liable parties in section 24(1) KSVG, such as book, press and other publishing houses, press associations, radio, television, galleries, art dealers and companies in the field of advertising and public relations for third parties.

But “normal” companies can also be liable if they conduct advertising or public relations for their own business and commission self-employed artists or publicists for this, regardless of the number of engagements, and the total fees they pay in the calendar year exceed EUR 700 in 2025 or EUR 1,000 in 2026.

The taxable amount is the remuneration for creative services that the liable party pays to self-employed creatives over the course of a calendar year (section 25(1) sentence 1 KSVG). The tax itself is currently 5% under section 1 KSVG and is regularly adjusted.

If you fall within the scope of those liable, you are obliged to register with the KSK. The KSK does not need to make a prior request. 

Under section 2 KSVG, the KSK is obliged to check both the company’s liability in principle and that the social insurance contributions for artists are paid on time and in full. As a rule, this is done when Deutsche Rentenversicherung announces that it will audit the total social insurance contribution, which usually takes place every four years.

If there is a duty to pay, you are obliged to notify the KSK of the amount of all remuneration paid to self-employed creatives by 31 March of the following year using the form provided for this purpose. On this basis, the KSK determines the social insurance contribution for artists to be paid and lays down the definite assessment of the social insurance contribution for artists to be paid and the monthly payment on account to be made in a separate assessment notice (section 27(1a) KSVG). 

Furthermore, as the liable company you also have certain recording duties. These include keeping traceable records of all remuneration that is the basis for liability to pay social insurance for artists. Alongside this, there are further duties to provide and present information (section 29 KSVG). 

Compliance with reporting and payment duties is monitored during tax audits, in which the KSK and the Deutsche Rentenversicherung often work together (section 35 KSVG).

The difficulty presents itself in the question whether your company is liable to payment under section 24 KSVG and whether the service that you obtain from a self-employed person constitutes an artistic activity. It is currently disputed whether influencers are to be classified as artistic activity or not.  The Federal Social Court takes the view that those who work creatively in advertising and “on their own responsibility and not insubstantially contribute to the success of the advertising contract” are to be classified as artists as defined by the KSVG. The KSK considers influencers to fall clearly within this scope.

We have therefore established that the focus on influencers is currently also having an effect on the audit bodies of Deutsche Rentenversicherung by individual audits being announced outside the usual audit cycle that are restricted to the social insurance contribution for artists. 

If payments are not paid to artists on time or declared to the KSK incorrectly, this is an administrative offence. This applies to infractions of recording, information and presentation duties. They can be sanctioned with a fine of up to EUR 50,000.

Additionally, if the payments are not declared or is declared late despite being requested to do so, the amount of the social insurance contribution for artists will be estimated. The same applies if the payments relevant to assessment of the social insurance contribution for artists cannot be determined in an appropriate time during an audit owing to a lack of records.

Late-payment penalties are also charged on arrears of social insurance contribution for artists and payments on account.

We therefore recommend that your finance and tax departments consult with the marketing department at an early stage to make any subsequent declarations to the KSK in order to comply with their duty to report by the deadline of 31 March of the following year. 

We also recommend undertaking a case-by-case examination because there are situations in which you may not have any liability. This can be the case in cases involving cross-border situations or if agencies or intermediaries are involved. On the other hand, there may be situations that do not trigger an obvious liability. This may be the case if, for example, an activity is concerned that is made up of different areas or if the service is provided abroad but exploited in Germany.

Conclusion:

Why the tax and marketing departments should now talk to each other

The current interest of the tax authorities in influencers can become tricky for companies advertising, too.

So this is the right time for the tax departments of these companies to consult with their sales and marketing colleagues and find out “who provides what to whom”. This applies to influencers and to sponsoring, barter deals and other payments to non-employees and employees alike.

After taking stock in this way, compliance checks should be carried out to uncover any defects in processes and to take the next steps.

These can look very different: from subsequent reporting to tightening up the design of processes all the way to tax control framework projects – or simply to being able to check the box that you have got everything under control. The important thing now is that you take the first step.

And if you have any queries at any point or need any support, our experts are always available. Whether it’s a joint kick-off meeting to get all those involved round the table, a toolbox for the compliance checks or a copilot for your internal audits.