It’s not a surprise that nowadays the rise of influencers has reshaped the landscape of traditional marketing worldwide, including Cyprus. Influencers, utilise social media platforms – Instagram, Facebook, YouTube, TikTok – to become powerful faces for different brands. However, as the influencer industry continues to grow, so do the complexities surrounding its taxation, particularly Value Added Tax (VAT).
In Cyprus, VAT regulations apply to the sale of goods and services, including using online influence to promote and sell goods and services through sponsored content, endorsements and collaborations.
Influencers will need to evaluate early on whether an economic activity is being carried out, and to determine whether there is an obligation to register for VAT. Considering that in Cyprus the threshold is relatively low, and that in some cases supplies of services within the European Union require immediate VAT registration regardless of threshold, combined with the likely penalties for non compliance, it's important that the possible VAT implications are not ignored.
Defining the VAT position and determining any VAT liability is not always straight forward and there are a number of variables to be considered. For example, income generated from platforms based on the popularity of the channel/profile/content may not be subject to VAT though this depends greatly on whether there is direct corelation between the income and the content, and the influencer is considered to be conducting economic activity, amongst other factors. The supply of free products is another situation which warrants attention as there may be an underlying barter transaction or the free supply may come under conditions which lead to an obligation to account for VAT.
Indeed, these are many models and methods that are implemented to monetize content and derive revenue from influencer profiles/channels and content where the VAT implications have not have been given due consideration.
Additional complexities may arise where influencers collaborate with international brands or operate across borders. VAT in such cases depends on various factors, including the location of the supplier and recipient, as well as the exact nature of the services provided.
In some cases it may be beneficial to register for VAT voluntarily where there is no obligation to do so. This enables the recovery of input VAT which has been paid on expenses such as subscriptions, purchase of equipment and other set up and running costs.
In conclusion, while influencers play a significant role in modern marketing strategies in Cyprus by shaping consumer trends and driving brand engagement, they should also navigate the landscape of VAT matters to ensure compliance with rules and regulations. By proactively addressing VAT complexities and seeking professional guidance, influencers can sustain success while maintaining legal and financial integrity
Further enquiries, please contact:
Christiana Iacovou
T +357 22600000
F +357 22600001
Authors:
Kyriakos Fili, Partner, VAT Services, Grant Thornton Cyprus
Constantinos Loizou, Senior Manager, VAT Services, Grant Thornton Cyprus