The development of technology and social media in the modern world has given rise to new business models, which are subject to clear and straightforward tax regulations. We are referring to influencers.

The digital economy, in particular, has accelerated the erosion of tax bases and the creation of situations of tax immunity at a rapid pace—situations that should be avoided from the outset to ensure the sustainability of tax systems. This has caused upheaval and concern, not only because it results in losses of tax revenue, but also because it runs counter to fundamental principles and other core values. Such as the principle that taxes should be paid according to one’s ability to pay (based on the fundamental principle of equality).

Taxation of influencers in Portugal

«Digital influencers» are a good example of this today. These are individuals—some more well-known to the general public than others, or who have gained recognition through social media—who, in recent years, have taken on a role in publicizing and promoting various products and services. They often function as full-fledged online advertising agencies and represent one aspect of e-commerce.

Taxation of Social Media Influencers

Brands that reach out to these influencers—who thus enjoy significant public exposure and reach a large number of consumers—aim to generate profits through contractual arrangements or more ad hoc partnerships.

Influencers are paid for their services, either in cash or in kind—for example, when they agree to post content in exchange for the product or service they are promoting. There are even cases, such as affiliate programs, where influencers agree to receive a percentage of the sales generated by their «code» associated with a brand or product, as well as other payments based on the number of visits to the page of the brand or product promoted through their posts.

Being an influencer is already a professional endeavor that involves significant amounts of money, so it’s important to understand how your income is—or may be—taxed in Portugal.

Taxation of Influencers as Individuals (IRS) in Portugal

Individual taxpayers who are tax residents of Portugal are taxed on their worldwide income for IRS purposes. Nonresidents, on the other hand, are taxed only on their income from Portuguese sources.

Thus, influencers who are tax residents of Portugal will be taxed on their Portuguese income and on income from foreign sources, while non-residents may still have tax obligations in Portugal—such as filing tax returns—if they earn income there.

In either case, since this activity is carried out here, the amounts earned by the influencer may be subject to IRS tax, and it is possible to classify them either under Category A (employment income) if they are earned under an employment contract, or under Category B (business and professional income) if they are earned as self-employed professionals.

Taxation of Influencers in Portugal

It is important to note that what distinguishes one type of income from another is, respectively, the existence or absence of a contractual relationship that implies the service provider’s subordination. Given that most influencers provide such services to more than one brand and are generally free to determine how they advertise and promote the product or service in question, it seems to us that in most cases, there will be no real legal subordination, so this income should, as a general rule, be classified under the Category B.

This also means that these service providers are required to register their business with the tax authorities and to issue invoices/receipts for the services they provide, which are taxed at the general and progressive rates, plus the IRS’s additional solidarity rate (up to 48% plus 5%).

In addition, depending on their revenue, these professionals may be subject to the simplified system (in which income is determined based on coefficients) or the organized accounting system (in which income is determined based on accounting rules and all profits and expenses are recorded).

It should be noted that all forms of payment mentioned above, including payments in kind, are subject to IRS taxation. This is because the Code itself provides for the taxation of income received in cash or in kind and establishes methods for determining the amounts to be taken into account in the latter case.

However, certain «gifts» may be exempt from taxation because they have little economic value or are considered «gifts» according to social and commercial customs. Depending on the entities to which they provide services—namely, their respective tax residence—income may be considered to be of Portuguese or foreign source, and the entities paying such income may also be required to withhold tax at source.

Taxation and VAT

Like other service providers, influencers may also be subject to other tax obligations, including VAT. In fact, under the relevant tax code, the VAT exemption should apply only when the transfer of goods is free of charge, or in the case of low-value gifts or samples. In all other cases, which must be classified as the provision of (paid) services, VAT must be calculated and paid.

Social Security Contributions

Similarly, these professionals may be required to pay social security contributions based on their income, and it should be noted that currently, the rate for self-employed workers is set at 21.4 %, rising to 25.2 % for sole proprietors and owners of single-member limited liability companies, as well as their spouses.

Stamp duty

Finally, it should be noted that when brands provide digital influencers with goods of varying value (as is the case, for example, with jewelry), if this transfer cannot be considered income (in kind) or a gift according to customary practice, such a transfer will be subject to stamp tax at a rate of 10%.

It should also be noted that this position could be considered highly controversial, since it would apply only to situations involving a genuine gift to the influencer, without any consideration in return (advertising). This would amount to a genuine gift, which, naturally, would be very difficult to demonstrate, since the brand, when it «gives» a certain item, will always have a latent interest and the expectation that the influencer will showcase it to their audience.

Taxation of Influencer Companies

Some influencers often choose to set up businesses (such as sole proprietorships) through which they provide their services, rather than operating as independent contractors.

Just as individual taxpayers who qualify as tax residents in Portugal are taxed on their worldwide income for IRS purposes, companies that are tax residents in Portugal are taxed on their worldwide income.

Taxation of Influencers in Portugal: Companies

Portuguese companies (with their principal place of business or actual residence in Portugal) will be subject to corporate income tax on their worldwide profits.

In addition to the costs of incorporating and maintaining the company, the company will also be required to pay corporate income tax on its taxable profits (at the general rate of 21 %, plus municipal and state surtaxes and autonomous taxes), determined based on accounting rules.

Businesses are required to follow the formal accounting system, which requires them to have at least one bank account used exclusively for business purposes to prevent any commingling of assets, and they must also appoint a certified public accountant.

Conversely, when funds are transferred from the corporate sphere to the individual sphere, whether through an employment contract (Category A) or the distribution of profits (Category E), such income will be subject to IRS taxation at the individual taxpayer’s level, and the company must also comply with its withholding obligations.

Furthermore, if certain conditions are met, the tax authorities may disregard the company’s structure and attribute this income directly to the shareholder under the tax transparency regime provided for in the Corporate Tax Code, thereby taxing these amounts at the shareholder’s level (in IRS Category B).

It should be noted that in the case of a self-employed professional, personal assets and «business» assets are one and the same, and the former is liable for debts incurred by the latter. However, in the case of single-member limited liability companies, the (sole) member’s liability is limited to the amount of the share capital, which implies a greater risk for the respective creditors.

In conclusion

In summary, influencers in Portugal are subject to personal income tax on the income they earn from their activities, whether in cash or in kind. If they choose to form a corporation, the corporation will also be subject to corporate income tax, and the income it distributes (salaries or wages) will be subject to corporate income tax. Dividends paid to shareholders will also be subject to’IRS.

In any case, influencers in Portugal are not exempt from taxes; rather, they must pay taxes based on their ability to pay.

If they conceal this income, the tax authorities have mechanisms in place to investigate abnormal tax situations, including those that constitute administrative or criminal offenses, such as mechanisms for taxing unjustified wealth and asset increases based on indirect valuation methods.

In this case, the legislature shifts the burden of proof to the taxpayer, who must demonstrate that he or she did not earn the income.