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TikTok Taxes
Make money with TikTok, but watch out for taxes
This“TikTok Taxes” tutorial carries the motto: Make money with TikTok, but watch out for the taxes. We’ll explain how to make money with TikTok in the first place, but also what to consider tax-wise. Our guest is our expert and tax consultant Thomas Matisheck.
TikTok Taxes - Preface
In this episode you can once again expect a guest and expert you may already know. Because this episode is a tax episode and so we brought Thomas Matisheck on board. If you are a musician, influencer or online retailer and would like to get advice from him, his website is linked in the video description, where you can then make an appointment with him. Before I get started and tell you about TikTok revenue, I’d like to announce another new feature. From now on you have the opportunity to benefit from exclusive eBakery eCommerce and online marketing content. How do you ask? We have set up a channel membership for the eBakery YouTube channel, which allows you to become a member for 99 cents, giving you access. This way you support the production of our videos and at the same time receive further added value.
What is TikTok?
But now back to the topic. How does the topic of TikTok and taxes fit together?
For all those who are rather less on social media platforms a short explanation. TikTok is a social media platform on which mainly short videos are uploaded. In the beginning, these were exclusively dance and lipsynch videos. In the meantime, there is hardly an industry that is not represented on TikTok. Comedians, lawyers, photographers, and and and. This means that not only entertainment content is offered, but also partly educational content, which can probably be related to the fact that currently up to 10 minute long edgy videos can be uploaded. And where there are many active viewers and many industries, advertisers are not far away. Therefore, with the right reach, you can earn quite considerable sums on TikTok. And this is where the circle closes, because this income must of course be taxed at a certain point. But Thomas will tell you more about that later. Let’s clarify in advance what you can now earn money on TikTok.
Earn money with TikTok
Let’s start with sponsorship. Ex. Brands benefit from product placements, as do content creators.
That means a startup that has developed a new water bottle for athletes is now actively looking on TikTok for creators with a high follower count and a good engagement rate who produce sports content. Communication can then take place either via business email, DM or on the Creator Marketplace. The latter is one of the 5 methods of TikTok Creator Next program to earn money as a creator. This is a platform provided by TikTok on which companies can search specifically for influencers. But Creator Next includes even more ways to earn money on TikTok.
From 1000 subscribers you have the possibility to stream live. Within this stream, viewers can tip the streamer and give live gifts. But here’s the first catch, direct tips can only be applied if you have 100,000 followers or more. Therefore, as a small TikToker, you will have to make do with the live gifts, which can then be converted into money. A similar function is then also available for videos -. the video gifts. Which your viewers and fans can then use to reward you for your videos. But here, too, one criterion is the 100,000 subscription hurdle.
TikTok independent methods to earn money
Since 2020, it has even been possible to be paid by TikTok itself, with the help of the TikTok Creative Fund. However, compensation is 2 – 4 cents per 1000 views.
That means you have to reach some people with it, so that it is worthwhile. But there is also a possibility for you to generate money independently from the Creator Next program.
One option would be affiliate marketing. This is offered by TikTok itself within the TikTok Shop Seller Center or by external providers, such as Adtraction. Here you get an affiliate link from companies, which you can then embed as your website in your bio from 1000 subscribers. Now you have to promote this link through content. For each sale through this link you will receive commission. Another option for more established creators would be to sell your merch. If you use Shopify as your store system, you can connect it to TikTok and use the TikTok Shop to promote your products on your home platform.
TikTok Taxes with Thomas Matisheck
So you see that there are countless ways to earn money on TikTok. This brings opportunities, but also obligations. Because as with any commercial activity, you are liable to pay taxes. This means you have to pay tax on the income, but you can also deduct certain expenses, such as the camera, laptops or tripods. Thomas Matisheck will now tell you what you need to bear in mind.
TikTok Taxes - Is being a TikToker an entrepreneur?
Hello and welcome back to the topic of taxes. Today it’s all about TikTok and for those of you who don’t know me yet, my name is Thomas Matisheck, I’m a tax consultant, certified e-commerce consultant and so my focus is on online retailers, influencers and everything that goes with it. And TikTok is becoming more and more popular, so the question is always: when do I become an entrepreneur here?
In principle, you are an entrepreneur first if you carry out a commercial or professional activity on a sustained basis. This means that if you want to generate revenue via TikTok, you are basically an employee first, and this simply raises the question: Do I have to file a business registration? Am I self-employed? How is this actually to be handled?
There it is actually relatively clear. So in most cases, around 90 – 95% are simply the influencers who are on TikTok are also commercially active. This means that you must submit a business registration. Unless you are perhaps an artist, musician or the like. Then you might be able to refrain from doing that. But in most cases, as I said, this is not the case. At the latest, if he then sells products in the field or offers merchandise or something, you are then out of self-employment. So basically first register a trade.
The questionnaire for tax registration
Then each of you, no matter if you are an artist or have a business, has to submit a questionnaire for tax registration. You will then be registered with the tax office.
Fills this out conscientiously. The points “sales” and “expected profits” are always estimated. It’s such a little glass ball. You’ll just have to see what you’re counting on. It is better to calculate a little more conservatively than too much. Because based on this information, advance tax payments are usually determined. So do that very very carefully.
What you absolutely must not forget is the VAT ID, which you should definitely apply for. This is always essential for you in online trade / e-commerce. Because you are always dealing with foreign service providers, foreign platforms and so on, where you have to identify yourself as an entrepreneur and this is usually only possible via the VAT ID.
If you do not have them, it will lead to more disadvantages than advantages, but please consult a tax advisor.
My recommendation would be to be sure to apply for it as well.
The TikTok taxes - The sales tax
Now eventually you get your tax number and your sales tax ID and you start. Then the question is simply always: What taxes do I actually have here, what taxes do I have to pay attention to?
And that’s sales tax and income tax in the first step and then probably trade tax at the end.
Wass is subject to sales tax first?
Actually, almost all revenue. If you have merchandise items, they are subject to sales tax. If you get a commission for presenting certain products, this is subject to sales tax. If you receive commissions for voucher codes or similar, this is subject to sales tax.
Do you have a sponsor? Again, you may be presenting something, albeit in the background and then that is subject to sales tax.
So a little bit out fall the Donations. These are mostly not subject to sales tax. But this is because there is no consideration. However, if you also receive gifts, for example, a product that you can present and keep, this is subject to sales tax. If you can stay in a hotel for free, this is usually a consideration for something and is also subject to sales tax, so please be careful there again. Most things are simply subject to sales tax. It just depends on the individual case when it might not be subject to sales tax and that’s usually just these donations or when you get a gift. The donor then pays the tax. Then it is possible that it is simply not a sales tax transaction and also not an income tax occurrence for you. But then you always have to document that. As a rule, please assume that it is subject to sales tax and calculate that in.
The TikTok Taxes - Income Taxes
The next major issue is income tax, i.e. income tax and trade tax. First of all, you can say that, in principle, only profits trigger these taxes. If you make losses and this becomes sustainable, it can lead at some point to these losses no longer being recognized for tax purposes. Then one speaks of Liebhaberei. This always happens when no total surplus, i.e. no profit, is generated over a certain period of time. Maybe because of too high costs, but we do not assume that. We assume that you are successful, so the profits you make are subject to income tax. And if you make a profit of more than 24,500 euros, that’s the tax-free amount, above that there is also trade tax. Because the trade tax has lost a bit of its “horror”. Because the trade tax is credited to the income tax for the most part. Depending on the municipality in which you live, it may simply be that the assessment rate of the municipality is so high that no full credit is given. But a large part of the trade tax is credited. Therefore, it is of course not nice but is no longer as dramatic as it once was. So please build up reserves. Maybe 30% of your profit should be put aside, so that you are not surprised when you have to pay the tax. That would be simply very annoying and then it comes usually also violently. Especially if it goes well, if perhaps several years in a row assessed and then you have such a wave of taxes that you put off. That is not nice. That’s why you need to build up reserves so that you can afford it in the long term. Then also make sure that you declare all the income. Because the tax authorities get control messages from other tax offices or even from foreign marketplaces, etc., so that if you do not declare income, that can be quite noticeable. So please please be transparent here and declare all your income.
What expenses can you claim?
So what are classic issues anyway?
So that you get a feel for it at all, what can you claim as a business expense.
Basically, the legislator says there – operating expenses are everything that is necessary to maintain the business, i.e. everything that can be directly allocated. Sounds totally simple, but in practice it is always met with incomprehension, because certain things are then restricted again and again. A classic example: spending is the smartphone when you’re on TikTok. With it one makes quite often simply yes appropriate videos, pictures and the like. So the smartphone is a business expense. The running costs of the smartphone, on the other hand, you have to be a bit careful. They are not completely operating expenses, but only to a certain extent, and this must then be determined.
Because every now and then you make private phone calls with your smartphone, surf the Internet privately and then the legislator says all by itself this should not be a business expense.
You also use it privately, so.
Camera, microphones, light, software, tools – all that equipment is, of course, a business expense. Not everything is always immediately deductible in the year you paid for it. Some things are also spread over several years. In principle, however, up to 800 euros are immediately deductible in the year of purchase. It also depends a bit on what kind of economic good it is. So don’t be surprised if some things just turn into expenses over time for you on your tax return and don’t immediately reduce profits.
Then laptop, computer, tablets, Internet connection and so on – of course, this is also operating expenses.
What about clothes?
Then consider, for example, if you always present certain clothes, this could possibly also lead to operating expenses. But when it comes to clothing, the legislator is simply very very picky and usually says that this is subject to private lifestyle. But let’s say you have a certain cosplay outfit that you’re always out and about with, and that outfit comes up again and again in your videos. Then it is indeed an operating expense.
Otherwise, if you just put on a polo shirt or something like that, it is often not a business expense, so it is not recognized as such. Unless you also have like me e.g. a logo on it for advertising purposes etc., then it is. So clothing is to be considered very differentiated.
TikTok Taxes - The travel expenses
Then travel expenses is also such an ongoing issue, classically with influencers, TikToker, content creators and so on.
Yes, if they are business-related, travel expenses can also be claimed as tax-reducing. So as an operating expense. But please have a travel documentation that clearly and unambiguously shows where you have actually been, what was the occasion, what was the operational part.
Maybe you even have a vlog or the like that you can document about it then simply then that.
But I would actually also write a small summary, file it, then you know even after two – three – four – five years, when the audit comes, what has been there and can then prove it again. It is not enough that it goes through within the framework of the determination of profits with the submission of the tax return. No, but that it stands up to scrutiny in an audit, so you have to document there with that.
Tax trap study
Last but not least, the classic study.
Clearly also this can actually be claimed.
Always under certain conditions. But the study can also become a tax trap.
Namely, whenever it is your property.
So if you have an apartment that belongs to you all alone, not with your partner together or a house maybe even what also belongs to you alone, so this study can become a tax trap. With the house it goes also naturally, if you bought this together with your partner perhaps.
With the apartment too. But then it is a bit more difficult with the surfaces. Please pay attention to it.
Yes, a study can be claimed, even the whole equipment is a study, but the study can always become a tax trap.
TikTok Taxes - Summary
So let’s summarize that again. In most cases, a business registration is required. In any case, you must fill out the tax registration questionnaire. In this you must estimate your future income. In any case, fill it out conscientiously, as advance tax payments will be calculated on the basis of it. Since as an influencer you may be dealing with international companies, apply directly for a sales tax ID. Taxes that could affect you would be the sales tax and the income taxes, which include income tax and trade tax.
The sales tax affects everyone, the business tax only those who come over 24,500€ per year. On the other hand, Thomas has explained to you what you can declare as expenses. Which can definitely include equipment costs and if it’s a business trip, travel. Cell phone costs and Internet costs are deductible to a limited extent. So you see the devil is in the details. So if you want to be on the safe side, contact a tax advisor and go over this once with them. If you are just in this field social media influencer or in the field of eCommerce, we can only recommend Thomas Matisheck.
Social media agency eBakery
We hope this video has given you an overview of taxes in the social media sector. If you have more specific questions about TikTok, we will be happy to help you as a social media agency. Make an appointment directly here.
Do you have questions or need an individual offer? Do not hesitate to contact us.
Haben Sie Fragen oder brauchen ein individuelles Angebot? Zögern Sie nicht, uns zu kontaktieren.
