The Tax and Customs Administration’s ROW knowledge group has a position An article has been published on whether donations can be a source of income. The answer is: yes.
Vloggers
The question concerns a small group of journalists who produce a weekly programme on their own channel on a social media platform. The platform does not sell any adverts around the programmes. During the programmes, the journalists call on their followers to donate in order to save the channel or ensure its continued existence. As a thank you for their donation, donors may receive priority access to or exclusive content.
Donations can be made via a website associated with the programme. That website also features an online shop selling merchandise. Donations are processed via the platform, which transfers the amounts received after deducting a commission fee. The summary of the facts of the case concludes with the observation that, in practice, the amounts received can be quite substantial.
The question is: “Do the activities in the context of which the donations are received constitute a source of income?“.
Source of income
The expert group begins its response by noting that the assessment of whether a source of income exists depends heavily on the specific facts and circumstances.
The knowledge group then goes through the three conditions for a source of income:
- participation in economic activity;
- the (subjective) intention to make a profit;
- the (objective) expectation that the benefit will reasonably be realised.
Participation in economic activity is deemed to take place when the activities occur outside the context of family life or leisure pursuits. Setting up one’s own social media channel and actively soliciting contributions constitutes participation in economic activity. It is irrelevant for this purpose that the remuneration was not agreed in advance. Gifts made out of generosity do not constitute a source of income if the payments are made by someone who has no interest in the activity being carried out. In the present case, the donor has an interest in enabling the next broadcast(s) to take place. For the recipient, the sums received are closely linked to his or her business or professional activity.
The objective of making a profit is achieved through agreements made with platforms and service providers regarding the donations to be received.
There is a subjective expectation that a profit will be made where the facts and circumstances indicate that the expected donations will exceed the expected costs. In this regard, facts and circumstances from other years must be taken into account if they can shed further light on the matter.
WUO or ROW
Next, it must be determined for the recipient whether the income is taxed as business profits (wuo) or as income from other activities (row). The expert group does not answer that question. The advantage of business profits is, of course, that the SME profit allowance (and, where applicable, the self-employed person’s allowance) then results in a slightly lower tax burden.
Opinion
The expert group (naturally) expresses the views of the Tax and Customs Administration, and it remains difficult to interpret this type of income in every specific situation, particularly when it comes to newer ways of generating funds. However, revenue will often not simply fall into one’s lap, meaning that – at least at some point – income tax will be unavoidable.
In an article published on the same day position With regard to the allowances received by host parents (€35 per day), the expert group concludes that this does not constitute a source of income. The voluntary nature of the work is paramount, and the work falls within the personal sphere. Furthermore, the costs exceed the benefits, and it is irrelevant whether the costs would be tax-deductible.