Influencer impact

How a multidisciplinary approach helps clients decipher when influencer marketing services activate withholding taxes.

How do you take advantage of the rise in influencer marketing without unknowingly triggering withholding tax? That’s the challenge facing many businesses today.

Influencer marketing has emerged as one of the most effective ways for businesses to reach their target audiences, transforming how they promote their products and services, as well as how consumers engage with their brands. But it's not without its hurdles. 

The location and manner of an influencer's posts play a crucial role in content rights, while monetary considerations vary widely between influencers. Moreover, influencers receive various forms of compensation, including appearance fees for event attendance, interviews or autographs, as well as benefits like complementary deliveries of the endorsed products. 

The complexity for businesses arises from the disparity between the diverse array of services and compensation within influencer marketing and the lag in corresponding tax regulations to address this intricacy. 

A failure to understand when and which services trigger withholding taxes exposes businesses to possible penalties. 

A complex and innovative relationship

A multidisciplinary team from across our global network, led by our German colleagues, came together to identify a practical and pragmatic way of engaging, working with and monitoring influencer activity.

Simplifying the tax puzzle

Our team developed an ‘influencer matrix’ designed to monitor each influencer marketing service and the subsequent withholding and indirect tax impact it brings to a business. 

They devised a series of streamlined processes, including standardised contracts and invoices, and a set of controls that ensure that each organisational department involved in the influencer relationship - from marketing to legal, from the tax team to the accounts department - is aligned and treats the influencer in a consistent way. 

It’s through this consistent and centralised approach that businesses can minimise the risk of unforeseen costs and ensure appropriate tax treatment from the outset.