Collaborations with content creators – is your company tax and social security law compliant?

Content creators are increasingly coming under scrutiny by the tax authorities. In North Rhine-Westphalia, the tax authorities recently set up a separate division for criminal tax law. A side effect of this increased attention is that also cooperation partners of content creators will come under greater scrutiny from the authorities. Our tax experts at Oppenhoff provide you with an overview of how businesses might be affected by the increased attention from the tax authorities and what challenges with regard to tax and social security contribution exist.

Tax cooperation obligations of companies

When tax and social security audits are conducted at content creators, this may also be relevant for their cooperation partners. For example, businesses can expect the tax authorities to send (collective) requests for information regarding their collaboration with content creators. In addition, cooperation partners could be called as witnesses in proceedings against content creators, which could lead to measures such as searches of the companies concerned. Such contact with the authorities should always be supported by competent legal assistance; it is also advisable that a preventive assessment of the potential risks is carried out.

Income Tax structuring options

Businesses that collaborate with content creators are usually not their employers. In order to make the collaboration more attractive for content creators, cooperation partners should consider applying flat-rate taxation (Section 37b of the German Income Tax Act (ITA)). This regulation allows companies to pay income tax, for example, for providing products to non-employees, at a flat rate of 30 %. This is attractive for content creators, as it means they insofar do not have to fulfil their tax obligations themselves. When opting for the flat-rate taxation, cooperation partners are subject to strict documentation requirements.

Value Added Tax: the question of service relationships

When collaborating with content creators, it is crucial that the VAT treatment of the service relationships be identified and correctly assessed. For example, depending on the specific cooperation agreement, the transfer of goods may be assessed as a barter transaction, a turnover similar to a barter transaction, or a mere provision. The VAT assessment has a direct impact on invoicing and input tax deduction. Cooperation partners should take the current proceedings as cause to check that their invoicing is correct in order to protect themselves against liability risks and input VAT refund claims.

Consideration of withholding tax in international collaborations

Domestic companies that enter into a cooperation agreement with content creators based abroad must comply with their Withholding Tax obligations (Section 50a ITA). German cooperation partners are obliged to notify and pay tax in Germany for certain services provided by the content creator. Difficult delimitation issues may arise, particularly when benefits in kind are provided to foreign content creators. If the business fails to comply with it’S notification requirement, there are tax liability risks.

Obligation to pay contributions to the artists' social security fund?

If business cooperate with content creators who are eligible for social insurance cover through the artists' social security fund, the company may be obliged to pay the so-called Artists' Social Security Contribution. The rate for the Artists' Social Security Contribution is 5 % of the fee and must be paid to the artists' social security fund. The commissioning businesse’s obligation to pay such contributions depends on the conditions and the terms of the cooperation agreement and must be evaluated by the company autonomously.

Our tax team at Oppenhoff comprehensively supports you in analysing and minimising the risks arising from existing agreements with content creators. In particular, we assist you in dealing with requests or other measures issued by tax authorities, support you in the compliant onboarding of new content creators, manage transfer pricing issues for services received, and ensure your tax compliance. We also provide legal and tax assistance if  your cooperation agreements are rejected or questioned by tax authorities.

Just contact us – we are happy to help you to structure your collaborations with content creators in a compliant and tax-efficient way.

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