Taxation of Social Media Influencers in Switzerland

The economic importance of influencers on social media has grown significantly in recent years. Content that would previously have been considered a hobby or leisure activity is increasingly developing into structured and commercially successful business models. This professionalization has tax and social security implications that are often underestimated by those affected.

According to recent reports in the German media, the federal state of North Rhine-Westphalia is targeting influencers and accusing them of tax evasion on a large scale. An influencer is a person who has many followers on social media and can influence their opinions and decisions. By promoting products and services, such influencers can generate material income. What are the tax and social security conditions for such influencers in Switzerland?

Self-employment or Hobby?

To determine the taxable income, it must first be assessed whether the activity as an influencer is still a hobby or already constitutes self-employment. Based on established case law, the tax administrations use the following criteria to assess whether self-employment exists:

•  Sustainability and systematic approach
• Intent to make a profit (even if losses are incurred initially)
• Participation in economic life
• Own economic risk
• Use of business resources

If several of these criteria are met or one criteria is very pronounced, the activity is generally assumed to be self-employment - even if the activity is carried out on a sideline basis or no substantial profits are initially generated.

Although the activity as an influencer does not qualify as self-employment for tax purposes, the influencer must, in principle, pay tax on all income from his/her activity in accordance with art. 16 para. 1 DFTA. However, for administrative reasons, certain cantons have the practice of not taxing immaterial income from a hobby (e.g., canton of Zug). However, losses resulting from a hobby cannot be deducted for tax purposes.

Personal Income Tax

If the activity as an influencer qualifies as self-employment, the person must determine the taxable income on the basis of art. 18 DFTA. She or he must keep accounts. Taxable income includes cash payments (e.g., fees, commissions for links to online shops, remuneration for product placements, income from banner advertising) and non-cash benefits (e.g., cosmetics, hotel stays, invitations to events), provided that a service is rendered in return (e.g., Instagram post, YouTube video). Such benefits in kind are valued at market value in accordance with art. 16 para. 2 DFTA. If, for example, an influencer is paid for a post with a pair of designer shoes worth CHF 900, she must declare this amount as taxable income - even if she has not received any money. It is irrelevant for personal income tax purposes whether the income comes from a company in Switzerland or abroad.

In contrast to a hobby, however, the influencer may deduct all business-related costs from his/her income, provided that these are directly related to her gainful employment. Typical deductible expenses for influencers include, for example:

• Costs for photo, video, and editing equipment
• Communication and software costs (e.g., Adobe Creative Suite, Canva Pro)
• Hosting, domain, web shop, and platform costs
• Advertising and marketing costs
• Travel expenses in connection with collaborations (including additional meal costs)
• Training costs related to the activity performed
• Room costs for professional use (home office, studio, storage, etc.)

For expenses that are used for both private and business purposes (e.g., cell phone, laptop, vehicle), an appropriate private share must be considered. Purely private expenses are not deductible, even if they are used for content (e.g., vacations without contractual cooperation, private clothing unrelated to economic activity).

If the (net) income from the activity as an influencer is not declared in the annual income tax return, this may result in additional tax and criminal proceedings.

Social Security

Regardless of the treatment under personal income tax law, an assessment under social security law is also required. Recognition as self-employed activity is granted by the competent compensation office (“Ausgleichskasse”). The criteria are largely the same as those for personal income tax, with particular emphasis on the existence of entrepreneurial risk, own infrastructure, and multiple clients. The contribution rates are a flat rate of 10% for income above CHF 60,500 per year. Below this, graduated, regressive rates apply. Remuneration in kind is also subject to contributions and must be taken into account in the settlement based on market value.

VAT

Furthermore, working as an influencer may also trigger a VAT registration obligation. The condition under art. 10 VAT Act is that the influencer are self-employed, operate under his or her own name and is focused on generating income on a long-term basis. The criteria are comparable to those for personal income tax, but the intention to generate income (rather than profits) is sufficient. In addition, the influencer must generate revenues of at least CHF 100,000 per year from services provided in Switzerland and abroad, unless these are exempt from VAT. Services provided abroad are also relevant if they would be taxable if they had been provided in Switzerland. As with personal income tax, services that are remunerated in kind are also relevant.

If an influencer fails to comply with this obligation, this may result in criminal proceedings. In addition, the VAT must be paid retrospectively, including interest on arrears.

Cross-border Activities

Caution is advised when it comes to cross-boarder activities: anyone who regularly creates paid content for companies based abroad or travels to another country as part of a campaign should check whether this could also result in tax liability abroad. For example, if an influencer carries out paid projects in a particular country several times a year, she or he could be subject to a limited tax liability there - or, in extreme cases, even classified as a person with unlimited tax liability. In addition, some countries deduct withholding taxes on payments to foreign influencers - under certain conditions, this can be partially credited in Switzerland. An analysis in light of the applicable double tax treaties is advisable.

The same applies to foreign influencers who have projects in Switzerland.

Deloitte’s View

Income from influencer activities - whether in cash or in kind - is generally subject to tax and social security contributions in Switzerland. The tax treatment of these new forms of employment is complex and requires a good understanding of the relevant interfaces between tax law, social security, and double tax treaties. Especially in the case of cross-border cooperation, mixed-use operating resources, or benefits in kind, it is advisable to seek sound tax advice at an early stage in order to avoid risks and make targeted use of potential.