Withholding Tax to Influencers

2023.05.21  [Sun]

We are Murata Sogo Tax Accounting Office with an office in Miyakojima-ku, Osaka, and are specialized for inheritance tax and international taxation.
In this issue, we would like to summarize the necessity of tax withholding for remuneration paid to influencers, who are often requested to post on social networking sites.

1. Overview 

Some companies and individuals who are engaged in apparel and other businesses may offer their products to influencers, who are individuals with a certain degree of influence, free of charge, and pay compensation to the influencers in exchange for their "SNS postings" to share their impressions of the products they have used. In this case, you may pay the influencer a fee.
In this case, do we need to withhold tax on the compensation paid to the influencer? 2.

2.Remuneration and Fees for which Withholding is Required

Remuneration/fees for which withholding is required for income tax purposes are as follows

(1) Manuscripts, lecture fees, remuneration for design, etc.
(2) Remuneration and fees paid to attorneys, certified public accountants, etc.
(3) Medical fees paid by the Social Insurance Medical Fee Payment Fund
(4) Fees and remuneration paid to professional baseball players, diplomats, models, etc. (5) Fees for TV and radio appearances
(6) Remuneration/fees paid to individuals engaged in entertainment production
(7) Remuneration/fees paid to hostesses, etc.
(8) Monetary awards for advertising
(9) Fees paid to horse owners for horse races
(10) Prize money paid to horse owners for horse races

3.Are Remuneration Paid to Influencers Classified as "Remuneration/Fees, etc."?

Of the remuneration paid to influencers, those that could fall under 2 above would be (i) manuscript fees, remuneration for design, or (iv) remuneration/fees paid to models, etc. The following is an explanation of whether or not they fall under these two categories.

(1) Does it fall under "manuscript fees"?

A "manuscript fee," which is subject to withholding at source, is usually paid as compensation for a manuscript contributed by an author to a publisher, etc., which is then sold by the publisher, etc., as a book, etc. The author is not required to pay withholding at source. On the other hand, compensation to an influencer is compensation for the influencer's postings on a social networking service, not for the submission of text, etc. to a company. Therefore, they do not fall under the category of "manuscript fees," which are subject to withholding tax.

(2) Does it fall under the category of remuneration for design?

Most of the remuneration paid to influencers is considered to be remuneration for posting on social networking services. In such cases, the remuneration would be considered as "remuneration for design" and tax withholding would be required.

(3) Does it fall under the category of remuneration/fees paid to models, etc.?

Compensation to models" subject to withholding at source refers to remuneration received for having their appearance published in magazines, advertisements, or other printed materials. In this regard, since it is rare to print out an influencer's post, it does not fall under the category of "remuneration/fees paid to models, etc." either.

4. Summary

As we have seen above, most of the remuneration paid to influencers is likely to be related to posting on social networking sites, in which case there is no need to withhold tax. However, there may be cases where an influencer is asked to design a product and is paid for the design. In such cases, withholding tax will be required.

Please feel free to contact us.