Income from social media platforms – limited liability companies
The tax treatment of your income from social media depends on whether you have established a company or not. This guide contains tax instructions for working as a social-media influencer for those who own a limited liability company.
Another article discusses income taxes related to social media for individual influencers who receive wages and trade income, and for those who have obtained a business name: Income from social media platforms – individual taxpayers.
The income is attributed to the limited liability company
If you have a limited liability company, it is a separate tax subject. If the income you receive is always billed by the limited liability company you own, the company is the “corporate taxpayer” that must pay the income taxes. Not only the income in terms of money but also any other rewards such as gifts and free products are treated as received by the limited liability company, not you as a person.
Present tax legislation contains no specific rules on social media activity. This means that the general principles of income taxation will apply on your limited liability company. Accordingly, any income from social media and any expenses related to the activity on social media are taxed in the usual way.
Read more about income taxes and limited liability companies.
When do you have to pay tax on the income from social media?
Examples of taxable income for a limited liability company include:
- sums of money paid to your company in compensation, because you have promoted, showcased, marketed another company’s products
- benefits or rewards in some other form and with a value that can be expressed as a sum of money such as discounts, gift cards, value cards, free trips, free tickets
- free products as a gift from the other company – unless they fall under the category of usual promotional gifts. More detailed instructions.
If your company is not paid in cash, i.e. the company receives a product or gets a discount, the amount of taxable income equals the fair market value.
For tax purposes, “fair market value” means the probable selling price. This is the price that persons who are independent from one another would agree to pay for the asset or property if it were offered for sale.
No effect on your taxes is caused by whether or not you had agreed in advance with the other company that a product or gift will be sent to you.
Example: A contract is signed, between your limited liability company and another business enterprise, that you promote their products through your social-media account for an agreed period of time. Your company gets to keep the product when the promotion period is over. No other compensation has been agreed on. The product’s fair market value is €1,000. In these circumstances, your limited liability company is treated as having received €1,000 in taxable income.
Example: Your company gets a product worth €300 as a gift from another company that has decided to send it to you on its own initiative. They believe your activity on social media might be a good way to showcase the product. However, your company has no obligation to do anything with the product, to begin using it for any purpose, or to send it back. As it turns out, you decide not to showcase, promote or market the product.
The consequence from the above is that the product must be treated as taxable income. The product’s fair market value, i.e. €300, is the taxable amount.
Some of the products your company receives as gifts are not taxable
It may be that you receive products that fall under the category of “usual promotional gifts”. They may be samples that companies usually send out to potential consumers on an occasional basis. If the selling price with VAT of the products is max. €50, it is regarded as part of a usual promotional activity between companies to receive such products. Accordingly, to receive a promotional gift does not mean that you receive taxable income. However, if your company has received the gift of a product as a form of compensation after you promoted the gift giver’s product on social media, the product’s fair market value would invariably be seen as taxable income for your company. In this case, the 50-euro threshold and any specific features of the product are not important: the entire value of the received gift is subject to tax.
Example: A company sends your company a product valued at €40 including VAT. The other company does not expect that you return the product later or that you promote the product on social media. It is an ordinary promotional gift, given to you for promotional purposes; in other words, not part of your taxable income.
Example: Your company and another company have previously worked together in terms of promotional activities. Now the other company sends you an article of clothing worth €100 from its new collection. This product is taxable income for your company because its VAT-inclusive price is over €50.
After my limited liability company has received products, can I take any of them for my personal use?
When you are on social media under the limited liability company’s name, the recipient of any gift products is your company, not you. Because your company is a taxpayer with an identity different from yours, you cannot take the company’s assets and property and begin using them yourself – or having your family use them – without tax consequences.
If you or your family members take a product away from the company for personal use, it means that you have received a benefit from the company. The benefit has a cash value. The value of what you received is seen as part of your taxable earned income.
It is necessary to enter the product’s value in company accounting either as wages paid to you or as a fringe benefit given to you. Yet another option is that you buy the product from the company, paying a price that equals its fair market value. If you bought the product, there would be no taxable income. If your company has not entered the products taken away as wage payments or fringe benefits in company accounting, and if you have not paid the fair market price to your company for the products you now have, the tax authorities treat it as “constructive dividends” that will be taxed in the same ways as earned income is taxed.
If your company enters the products’ values as wages of fringe benefits paid to you, the company is also entitled to deductions because expenses in the form of wages and benefits are tax-deductible. If in turn, you buy the products from the company and pay money for them, the price is part of the company’s taxable income, but the company is entitled to deductions because there probably is a deductible residual cost in company books, which is connected to the products you bought.
Example: Your limited liability company cooperates with another company, promoting its products. To show its appreciation for successful cooperation, the other company gives your company a handbag worth €1,000 in fair market value. This amount will be taxed as income received by your limited liability company.
To begin using the handbag yourself, you must have your company enter this amount as wages paid to you. The company accounts must show €1,000, the handbag’s value, as the wage amount paid to you. The company will also have to take care of the employer obligations that are connected to the paid-out wages. Companies are entitled to deduct their wages and employer contributions as expenses when their corporate income taxes are assessed. The €1,000 that you received as wages is part of your personal taxable earned income.
You can deduct expenses that support your activity on social media
When you complete the income tax return for your company, you can deduct expenses for the production of income, including social-media income. It is important for the tax-deductible expense amount to be entered in your company books.
If the company has received a product as a gift, and later, the product is used for a purpose related to the production of income, you can book a percentage of the gift’s value as a tax-deductible expense for the production of income. In this case, the deductible percentage must be based on the product’s fair market value.
If it is a consumable (such as a cosmetics product or a grocery item), your company is entitled to a tax deduction that reflects the part you have consumed of the products in order to produce income.
Example: You are a social media influencer and you own a limited liability company. You received baking ingredients as a gift from another company. The value of the ingredients is €100. In these circumstances, your limited liability company is treated as having received €100 in taxable income. You use all the baking ingredients you received to create baking-related social media content. Your limited liability company can enter €100, the ingredients’ entire value, as a tax-deductible expense.
If more expensive assets such as machinery and equipment and other moveable property are utilised for the above purposes, your company is entitled to tax deductions in the form of depreciation expenses, depending on how much the assets have cost and depending on the assets’ useful life.
Read more about depreciation.
Is the company liable to pay VAT?
If your turnover exceeds €15,000 in an accounting period, you must also register for VAT.
Read more: