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Taxation of advertising revenue from advertising packages

December 12, 2015 | 50,00 EUR | answered by Ralph J. Schnaars

I have purchased several $25 Ad Packs on Getprofitadz on the internet. The purchase price of these packages is an investment that will never be repaid. Lifetime advertising revenues are generated for the Ad Packs, which GetprofitAdz distributes to the AD Pack owners hourly according to a distribution key. When distributing the revenues, the earnings are divided into an Earning Balance (withdrawable earnings) and a Re-purchase Balance (earnings to be reinvested in new Ad Packs) in a so-called Current Balance list. I transfer the withdrawable earnings to my Cash Balance and book them for later withdrawal to an account at the 2Pax4You Bank in America. Since I already have a business for holiday home rentals and photovoltaic income, the advertising revenue should also be accounted for through this. I have the following tax-related questions: 1. Do I need to register a business for the new source of income in addition to my other business? 2. Can I create a profit and loss statement with the 3 sources of income (holiday home rentals, photovoltaic, and Ad Packs)? 3. Which revenues from the Ad Packs are taxable (only Earning or also Re-purchase Balance)? 4. Should the costs for the $25 Ad Packs and possibly also for the Re-purchase Packs be accounted for as advertising expenses? 5. In the event of a collapse of the company Getprofitadz, can I book my investments and the earnings not yet transferred to the bank as a loss in the income statement?

Ralph J. Schnaars

Dear inquirer,

here are the answers to your questions:

1) Yes. If you expect to make profits of more than EUR 24,500 per year, you should separate your commercial activities in order to take advantage of the trade tax exemption for each. This would require separate business registrations. If the profits remain "far" below EUR 24,500, an expansion of the existing business would suffice.
2) Yes, but as mentioned under 1), there is a tax exemption for each trade. This tax exemption is only available if the "businesses" are run separately and each has its own profit calculation.
3) All earnings are subject to taxation (both Earnings and Re-purchase Balance).
4) According to Getprofitadz's guidelines, this is considered advertising expenses and can be deducted accordingly. This applies to the initial "investment" as well as the reinvested amounts.
5) Since you have recorded all expenses/payments as advertising expenses, there will be no further losses if Getprofitadz goes bankrupt.

I hope I could help you with your considerations.

Kind regards,

Ralph J. Schnaars

STWB Steuerberatungsgesellschaft mbH
Direct contact +49 (0)171 525 20 42
Email mail @ stwb-steuer.de