Sources of income for influencers and how they are taxed if they live abroad, Germany

The involvement of influencers in marketing, so-called influencer-marketing, plays an increasingly important role in recent years. Lately, a number of German influencers have established themselves abroad, e.g. in Dubai, and have been operating from there since then. The question arises regarding a limited tax liability in Germany that may result in such cases.

Due to the rapid digital transformation, new sources of income are constantly emerging on the internet. Differentiating between the various activities is important for assessing the limited tax liability of expatriate influencers in Germany. As a rule, these influencers do not have a permanent establishment in Germany, which means that they cannot be taxed in Germany under Section 49 (1) No. 2 (a) of the German Income Tax Act (EStG). For the majority of typical influencer income, limited tax liability is therefore excluded. Only in exceptional cases where sponsorship contributions or digital content such as fitness courses are created in Germany, or where income from "donations" is generated in Germany through live streaming, or where influencers participate in events in Germany, do the influencers perform in Germany. These lead to domestic income according to § 49 para. 1 no. 2 letter d EStG. Domestic income is also deemed to exist under this provision if, in exceptional cases, influencers make videos or photos they have created available to an advertising partner or an online platform for use, e.g. by uploading them.
If the conditions of § 49 (1) no. 2 (d) EStG are not met, domestic income may be generated by exceptionally successful influencers in particular through the transfer or assignment of rights to domestic contractual partners in accordance with § 49 (1) no. 2 (f) EStG. In this case, the remuneration component that is attributable to the transfer of rights in the form of the transfer of photos, videos, podcasts or texts with or from influencers, for example in the context of sponsoring in brand partnerships or in the case of the transfer of name and image rights for advertising purposes or for the sale of branded products, constitutes domestic income.

It is not only influencers who face considerable legal uncertainty and difficulties in defining and allocating income when assessing domestic tax liability in cross-border contractual relationships. Domestic contractual partners, advertising companies and online platforms also face significant problems in assessing their withholding tax obligations under Section 50a (1) nos. 1 to 3 EStG. A detailed statement from the tax authorities would be highly recommended to ensure legal certainty for the parties involved.

Accounting, Book Keeping