Cooperation with influencers through barter

Marketing contracts are an area where, in addition to the legal risks, particular attention should be drawn to the correct wording of tax provisions and tax consequences of the activities described therein.

For instance, the supply of products to an influencer in exchange for promotional services constitutes barter, and the principal must document this transaction with a VAT invoice, as recalled by the recent judgment of the Administrative Court in Rzeszów of 24 August 2023[1].

Barter is an exchange of one good or service for another good or service and is a common practice in an influencer marketing. In most cases, a principal  gives its products to   a influencer in exchange for promoting them in photos or videos on social media. It should be noted that a barter transaction constitutes a contract for consideration (an exchange of mutual benefits between the parties) and gives rise to tax consequences.

For a principal, the barter transaction described above constitutes a supply of goods for consideration, even if the influencer does not carry out business activities. This was also confirmed by the discussed judgment of the Administrative Court in Rzeszów. The taxpayer in this case tried to argue that the goods (shoes) provided to the influencer are free of charge, which would allow the taxpayer to apply the provisions on samples or low value gifts and thus not to tax the goods provided for the purpose of promotional activities.

However, the Court, rightly so, confirmed that even if the influencer is not a  business entity, the transfer of goods to him for promotional purposes in exchange for an advertising service has is  the supply of goods and results in output VAT.

In contrast, the status of the influencer – whether he conducts business activity or not – involves different settlements of purchases. If the influencer conducts a business activity, he issues an invoice for promotional services. Whenever the benefits (handed out goods and promotional services) are of equal value, no cash will have to be transferred as a result of the set-off.

In turn, in a situation where the influencer does not conduct a business activity, he will not issue an invoice to the principal, so there is  no input VAT to be deducted.

Of course, in both situations the issue of the right to deduct input VAT emerges in respect of costs on a purchase or production of goods provided to the influencer.

While barter is not the only option for setting the terms of cooperaton with an influencer, it is widely used because of its clear rules. A principal may choose a different cooperation model, but the question should always be asked whether it will be equally effective business-wise and what tax consequences it will entail, and thus what steps should be taken to comply with all the relevant reporting requirements.

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[1] Ref. I SA/Rz 237/23.