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On the occasion of Advertising Day, this January 25, we want to analyze the changes that could affect influencers if the requirements to be considered users of special relevance are modified.
If the new regulation is approved within the framework of the General Law of Audiovisual Communication (LGCA), it would have direct consequences on the obligations of those considered users of special relevance who use video sharing services through different platforms, both in the creation of content and in advertising actions.
- What are the requirements for designating users of special relevance?
The requirements contemplated in the proposed regulatory change for an influencer to be considered a user of special relevance are:
- Significant revenues: gross revenues, accrued in the previous fiscal year, equal to or greater than €500,000, derived from the activity of users in video sharing services through platforms.
- Significant audience: it is considered that the service for which a user is responsible is aimed at a significant part of the general public and may have a clear impact on it when: i) The service has an average number of followers equal to or greater than 2 million during the previous year in any of the video sharing services through platform in which the user carries out its activity and ii) The service contains at least 24 videos in the previous year, regardless of their duration.
This regulatory provision is aimed at promoting the protection of the recipients of audiovisual content, especially minors, by establishing a series of parameters to regulate good advertising practices by the so-called users of special relevance.
The Explanatory Memorandum of the General Law on Audiovisual Communication, which is based on the Audiovisual Communication Services Directive, refers to these agents as users of special relevance (we quote verbatim):
"grouped under the concept of vloggers, influencers or opinion leaders, who enjoy relevance in the audiovisual market from the point of view of advertising investment and consumption".
- Why are these requirements not considered adequate?
Some entities of the sector, such as the Asociación de Usuarios de la Comunicación (AUC) or the Asociación de Televisiones Comerciales (UTECA) have shown their radical rejection to such high parameters affecting the scope of application of the Law. The latter, through a Press Release, has proposed to make the parameters of the new regulation more flexible and to establish lower criteria:
- Significant annual revenue of 100.000 €
- Significant audience of 100.000 followers or more
The relevant issue will be the final specification of these values and requirements set forth in the General Law on Audiovisual Communication. In order to establish them, a series of economic and social impact parameters have been followed, as detailed in the Report of the regulatory impact analysis of the Draft Royal Decree. In practice, this will mean that the restrictions contained in the Proposal (500,000 € turnover and/or 2 million followers) will only affect some two or three hundred content creators.
In Spain there are approximately 12,000 content creators or influencers with more than 100,000 followers. Therefore, it is considered that the fact that the subjective scope of application is so reduced will mean a considerable moderation of the positive effects of this regulation, since the aims and purposes of this regulation -mainly with respect to the protection of minors and consumers, as well as the promotion of ethical practices- will foreseeably be undervalued by the existence of an innumerable group of influencers who will not see their actions of content creation restricted.
Thus, the National Commission for Markets and Competition (CNMC), in its Report on the Draft Royal Decree, considers that "both the economic threshold and the number of followers are too high and there is a risk of leaving outside the regulatory scope those agents that have a considerable impact on consumers, especially minors".
In practice, the creation of content by the most relevant influencers in Spain will be restricted by the public administrations and thus become equal to, for example, television channels. As mentioned above, in order for an influencer to qualify as a user of special relevance, one of the requirements defined above must be met, i.e. significant income or significant audience.
In summary, the proposed regulation raises some concerns about its effectiveness, due to the establishment of extremely reduced parameters that restrict the application of these measures and limit their subjective scope. Consequently, in order to comply with the purposes of the regulatory change, as well as to protect the interests at stake of the most vulnerable subjects, a relaxation of the revenue and audience parameters is required to accommodate, within the consideration of user of special relevance, a majority group of content creators and influencers.
- Taxation applicable to content creators or so-called vloggers or influencers
Although the aforementioned LGCA does not regulate the taxation applicable to this type of audiovisual content creators or users of special relevance, the scope of application of the same is limited to those who are established in Spain, i.e., to those vloggers or influencers who reside here.
It is worth remembering that these content creators, who are tax residents in Spain, must pay taxes in Spain for any type of consideration they receive in the exercise of their activity, so that, for tax purposes, there are no specific rules that apply to these operators and that are different from any self-employed person who carries out an economic activity.
Thus, any content creator resident for tax purposes in Spain who receives any type of consideration, whether monetary (cash) or in kind (travel, products, vehicles) for collaborating in the promotion of any type of product, will be included as income from economic activities in their personal income tax.
In this sense, there is no quantitative limit for which influencers should not be taxed for the receipt of such considerations, but rather, from the moment they receive any consideration, in cash or in kind, for the promotion of a product, however minimal it may be, they would be performing an economic activity that would be taxable in their personal income tax.
As for the valuation when including such considerations in the income tax return, it is clear when it comes to monetary considerations, and must include the money actually received, but how are the products, trips, cars that content creators may receive as consideration valued?
Contrary to what one may think, such considerations are not gifts, but "payments in kind" for the provision of their advertising services and are subject to the influencers' personal income tax and VAT, the amount of which, when it comes to including it in the income tax return or issuing an invoice, will be the price that any customer would have had to pay to enjoy them under identical conditions. As an example, if an influencer collaborates with a hotel, promoting its brand, and in exchange receives a hotel night with breakfast valued at 500 euros, the imputable income for tax purposes to be taken into account by the content creator will amount to 500 euros.
Notwithstanding the foregoing, there are special rules in relation to the valuation of the consideration received by influencers in kind depending on the nature of the asset they receive.
Thus, in the event that a vehicle brand lends them one of its cars to use for a period of time, for the purpose of advertising said brand, the valuation of said vehicle will amount to 20% per year (i) of its market value or, in the event that the vehicle is owned by the payer, (ii) of its acquisition cost.
In short, the taxation applicable to vloggers, influencers or any content creator who performs an economic activity, will be exactly the same as that which must be applied to any self-employed person who performs an economic activity, regardless of the volume of income received as consideration for the performance of such collaborations for the promotion of services, products, etc., regardless of whether or not they are qualified as users of special relevance for the purposes of the LGCA.
At CECA MAGÁN Abogados we have a team of experts in specific legal services for influencers and users of special relevance and you can ask us any questions by contacting us here.
Mónica Muñoz, Pablo Pedraza and José Montolío
Lawyers in the areas of consumer, digital and tax law.
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