Social Trading - Taxation of Premium Payments
November 26, 2014 | 40,00 EUR | answered by Anton Pernitschka
How are success- or performance-based bonus payments that a trader can earn through social trading platforms such as Wikifolio taxed in Germany?
In order for the question to be considered answered, please address all sub-questions 1-4. If you are unable to answer all sub-questions or are unsure, please leave the answering of the question to a colleague.
1. Under which category of income tax do such bonuses fall if the underlying activity only reaches a moderate level and is operated "on the side" privately (from home, without the need for a specially established business operation)? What advertising costs can generally be claimed here? Would it also be conceivable that these earnings are only subject to capital gains tax?
2. Is a business registration, registration as a freelancer, self-employed person, or similar mandatory? Would it be necessary to apply for a separate tax number? At what point might registrations be necessary (e.g. starting the activity or generating first income)?
3. When do the bonuses become tax-relevant? At the time of generation (as a "fictional online credit") or only at the time when an actual cash payment ("transfer to bank account") is made to the trader?
4. The amount to be paid out includes 19% value-added tax, which is already deducted and withheld by the provider of the social trading platform before the payout through the application of the "reverse charge" procedure. Is the issue of value-added tax therefore settled for the trader, or are there further obligations regarding value-added tax (e.g. pre-registration, application for a value-added tax identification number, etc.)? Is it correct to assume that only the bonuses minus the value-added tax should be included in the income tax return?
Dear questioner,
In the context of an initial consultation and your fee commitment, while observing the regulations of this forum, I would like to answer your questions.
Success-dependent bonus payments obtained by a trader through Wikifolio are not considered capital gains for tax purposes; therefore, they are not subject to capital gains tax. However, the tax authorities have not yet commented on this issue.
According to § 15 para. 2 EStG, a commercial enterprise is a self-employed, sustainable activity undertaken with the intention of making a profit and representing participation in the general economic traffic. If these conditions are met in your case, you are generating income from a commercial enterprise. The scale of the operation or the lack of a separately established business facility are not relevant in this context.
Operating expenses, according to § 4 para. 4 EStG, are expenses incurred by the operation.
When starting a commercial activity, a commercial enterprise must first be registered with the locally competent municipal or city administration. The administration then informs the relevant tax office. The entrepreneur will then receive a questionnaire from the tax office. After reviewing the questionnaire, the tax office will issue a tax number.
Income is considered received when one can economically dispose of it (Federal Fiscal Court judgments of 09.04.1969, BStBl II 1969, 525, of 08.10.1991, BStBl II 1992, 174). Generally, disposal rights are acquired at the time of the occurrence of the performance or the possibility of achieving the performance (Federal Fiscal Court judgments of 13.10.1989 - III R 30/85 and III R 31/85, BStBl II 1990, 287). In your case, the bonuses may become tax relevant already as a "fictional online credit" if the above criteria are met.
If the reverse charge procedure applies based on the facts presented, the trader is not required to pay VAT.
Taxable other services according to § 3 a para. 2 UStG, for which the recipient resident in another member state is liable for the tax there, must be reported by the providing entrepreneur in the VAT pre-registration and the VAT declaration for the calendar year, as well as in the summary declaration. It is not apparent from the facts whether these conditions apply to you.
Since you are not paying VAT, the bonuses should be considered as net income.
The response was provided based on the information provided by you. Missing or incorrect details regarding the actual circumstances can affect the legal outcome.
Yours sincerely,
Anton Pernitschka
Tax consultant
