Influencers and tax as well as social security contributions – companies advertising with them shouldn’t underestimate the risk either

Influencer marketing in the spotlight of the authorities

Collaboration with influencers – influencer marketing – is a form of social media marketing that 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 provide an influencer with various benefits in kind – trips, invitations and tickets to events, free products, etc. These benefits all might trigger tax consequences although not all parties are aware of it.  

Tax authorities in various federal states across Germany have already formed special public task forces dedicated to investigating influencers and their tax compliance. Therefore, influencers are already right at the centre of attention of the authorities. 

It cannot be ruled out that after these 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 tax issues, many companies are not aware of the risks of influencer marketing regarding social security. The Artists’ Social Fund (Künstlersozialkasse, KSK) considers the work of influencers as artistic activity, which can establish a liability to pay social security contributions. Failure to comply may result in liability and companies having to pay significant fines. 
Therefore, companies and agencies should examine their processes involving collaboration with influencers and subject them to a compliance check. 

The areas that should be considered in particular are:

• wage tax related to all benefits provided 
• VAT and input tax 
• withholding tax 
• social security and the Artists’ Social Fund (KSK) 

Reviewing current processes or timely implementation of new processes offer the chance to correct errors and optimise internal processes.  

Ideally, processes that are well set up and documented can be presented within a tax audit and present not only a measure for risk mitigation and general 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 individuals are seldom employees of the advertising company– although this may be different for the particular category of corporate influencers.  

So why should wage tax even be a concern? This is where the flat rate taxation according to section 37b(1) of the Income Tax Act (Einkommensteuergesetz) comes into play.  
This taxation is an option that allows gifting companies to declare and bear the income tax for benefits in kind provided to non-employees. This option is to be exercised uniformly for all benefits in kind provided to non-employees (i.e. not only to influencers) for the whole calendar year. If section 37b(1) of the Income Tax Act is applied, recipients of benefits are to be informed accordingly since in this case, they don’t need to declare and pay tax on these income items themselves.

Flat-rate taxation by the advertising company does however have specific requirements in order to apply. Therefore, a case-by-case assessment is necessary, checking  what benefit has been gifted to the influencer and what was contractually agreed on.

Simply put, if the benefit 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 benefit. The same applies if the value of the individual benefit exceeds the threshold or to the extent that total benefits per recipient within a calendar year exceed the allowance of €10,000.

Therefore, the first point of examination should be whether flat-rate taxation might even apply.. If not, the advertising company cannot bear the tax triggered by the benefit. If flat-rate taxation applies, errors may be made in assessing the tax basis, i.e. the value of the benefit received. Please keep in mind that just because the benefit does not trigger any actual costs for the advertising company, that doesn’t mean that the tax assessment basis is nil.  

Please also note some other pitfalls, particularly if there is no contractual relationship between the influencer and the advertising company , i.e. in cases of an intermediary agency. 
Even with regard to the trend of standardisation and automation it is highly recommended to examine all cases individually in order to ensure tax compliance. 

VAT

For VAT related matters in the context of marketing services provided by influencers, but also in relation to sponsoring and incentives, the key question is always “Who is providing what to whom?”  

Only when all involved parties understand that a service is being provided - and what exactly each party is giving and providing - can the transaction be correctly categorised for VAT purposes.  
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 from the company.

The same typically applies to sponsoring. In practice, there is a risk that no invoices are issued when services are exchanged – whether with or without additional cash payment. These exchanges are often not recognised as being relevant for VAT. In most cases, barter deals do not involve any payment, as the value of one service is offset by the value of the service received. Nevertheless, both parties are obliged to properly document the transaction, issue invoices, and correctly declare VAT or input VAT to the tax office. Difficulties arise when the exchange of services is not recognised as such, no invoice is issued and correspondingly the revenue is not recorded in the accounts – and without an invoice, no input VAT deduction is possible.  

For this reason, analysing VAT processes in sales and marketing is one of the standard topics in tax control framework projects.  

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

• Are influencer cooperations subject to a thourough review – For example: Is the influencer entrepreneur? Where is their registered office? Do they have a valid tax number, etc.?  
• Have contracts and conditions been reviewed by the tax department? When agreements involve a mix of provision of goods, advertising services, licences rights and additional cash payments, proper documents becomes challenging. Often, the free use of goods is included, which further complicates the VAT assessment.  
• Is it verified whether invoices are issued correctly by both parties? Without proper invoicing, revenue may not be recorded, and input VAT deduction is not possible. 

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 arise: withholding tax under German law.

The principle is that if an influencer who doesn’t have a residence or a habitual abode in Germany realizes domestic income (section 49 of the Income Tax Act), he or she is subject to non-resident taxation. This can be triggered , for example, by sponsored posts during a stay in Germany, a livestream from Germany or appearing at an event in Germany. 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 speciality is, that these rules not only affect the influencer himself but also have a direct effect on the engaging company as a withholding procedure applies. Practically speaking, the German engaging company is liable to deduct and withhold tax at a rate of 15.825% on behalf of the influencer, and pay the tax to the responsible tax office (the Central Tax Office [BZSt]). 
If a double taxation agreement (DTA) is in place with the influencer’s state of residence, it may be possible to reduce or prevent the tax liability, e.g. if the DTA stipulates that the remuneration may not be taxed in Germany or at a different tax rate. However, this is only possible,, by presenting an exemption certificate to the engaging German company that must be applied for in advance or subsequently as part of a refund procedure. Dueto the long processing time at the Central Tax Office (BZSt) (at least 1 year) collaborations with influencers 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 refund procedure can be pursued to reclaim the withholding taxes.

If there is no DTA in place with the influencer’s state of residence, e.g.  with Dubai, the withholding tax is finalx.

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 flat fees into service and royalty components. 
Conclusion: those who work with international influencers should check their tax duties at an early stage and agree clear contractual terms. This reduces liability risks and unnecessary tax payments.

Social insurance and the Artists’ Social Fund (Künstlersozialkasse)

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

Most companies are not aware, however, how quickly they become the “profiting party” and that they therefore have a duty to pay contributions to KSK. The legal basis is  the German Artists’ Social Security Act (Künstlersozialversicherungsgesetz – KSVG). The scope of those liable is defined in section 24 KSVG. There is - both -a list of typical liable parties as stated in section 24 para. 1 KSVGsuch 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.

However, “normal” companies may also be obliged to pay contributions if they engage self-employed artists or publicists for advertising or public relations purposes for their own company and – regardless of the number of assignments – the total fees paid in the calendar year in question exceed EUR 700 in 2025 and EUR 1,000 in 2026. 

The basis for assessment is the remuneration for artistic services paid to self-employed artists by the person liable for the contribution during a calendar year (Section 25 para. 1 sen. 1 KSVG). In accordance with Section 1 of the Artists' Social Security Contributions Ordinance, the contribution itself is currently 5% and is adjusted regularly.

If you are obliged to pay contributions, you are required to register with KSK proactively. No prior request from KSK is necessary.

According to section 2 of the KSVG, KSK is obliged to check both the company's basic obligation to pay contributions and the timely and complete payment of artists' social security contributions. As a rule, this is done as part of the announcement of the audit of the total social security contribution by the German Pension Insurance Fund, which usually takes place every four years.If there is a basic obligation to pay contributions, you are required to notify KSK of the amount of all remuneration paid to self-employed artists by March 31 of the following year at the latest, using the form provided by KSK.

On this basis, KSK determines the artists' social security contribution to be paid and specifies the exact amount of the artists' social security contribution to be paid and the monthly advance payment to be made in a separate notice (Section 27 I a KSVG).

In addition, as a company subject to social security contributions, you are subject to certain record-keeping obligations. Among other things, you must keep verifiable records of all remuneration that forms the basis for the artists' social insurance obligation. In addition, there are further obligations to provide information and submit documents (Section 29 KSVG).

Compliance with reporting and contribution obligations is monitored in the course of tax audits, in which KSK and the German pension insurance funds often work together (Section 35 KSVG). 
The problem now lies in the question of whether you, as a company, are liable for contributions within the meaning of Section 24 KSVG and, secondly, whether the service you use from a self-employed person constitutes an artistic activity. With regard to influencers, there is currently a dispute as to whether this should be considered an artistic activity or not.

The Federal Social Court is of the opinion that in the field of advertising, people who are creatively active and who “contribute independently and significantly to the success of an advertising contract” should be classified as artists within the meaning of the KSVG. In the opinion of KSK, this clearly includes influencers.We therefore currently note that the focus on influencers is also affecting the German Pension Insurance's audit offices, in that individual audits are being announced outside the usual cycle of audits, which are limited solely to artists' social security contributions.

If you fail to report payments to artists to KSK on time or incorrectly, this constitutes an administrative offense. The same applies to violations of the recording, information, and submission obligations. This can be punished with a fine of up to EUR 50,000 in each case. 
In addition, if the fees paid are not reported or are reported late despite a formal notice, the amount of the artists' social security contributions will be estimated. The same applies if the fees relevant for the assessment of the artists' social security contributions cannot be determined within a reasonable period of time during a tax audit due to a lack of records.

Late payment penalties will also be imposed on outstanding artists' social security contributions and advance payments.

We therefore recommend that finance and tax departments communicate with each other at an early stage in order to make any late notifications to the artists' social security fund and to comply with your obligation to report within the reporting deadline of March 31 of the following year. 
We also recommend checking on a case-by-case basis, as there are situations in which you may not be liable for contributions. This may be the case for situations involving foreign countries or when agencies or intermediaries are involved.

On the other hand, there may be situations that do not obviously trigger a liability to pay contributions. This may be the case, for example, if the activity consists of different areas or if the service is provided abroad but used in Germany. 

Conclusion:

The current interest of the  authorities in influencers can also become tricky for advertising companies.

Therefore, now is the right time for tax departments to consult with their sales and marketing colleagues and find out “who provides what to whom”. This applies to influencers, but also to sponsoring, barter deals and other benefits to non-employees and employees alike. 
After this inventory, compliance checks should be carried out to uncover any defects in processes and take appropriate next steps.

These next steps can be various: from subsequent disclosures to resharpening process design 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 most important is taking that first step now.

Our experts are always available should you have any queries along the road or need any support,. 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 -we are here to help.