How to tax sources of advertising revenue on Youtube?

Youtuber's career seems increasingly tempting to young people.

Assuming that a large number of people can be interested in their content, and consequently the positive response of the community expressed in a large number of views to establish cooperation with the platform, the question arises – how do you qualify the revenue from advertising displayed during films?

This question is answered by the individual interpretation of the Director of National Tax Information of the day 18 May 2021, No 0115-KDIT1.4011.156.2021.1.MT – hereinafter referred to as the Interpretation.

The taxpayer (applicant) who obtained the answers 2020 revenue from advertisements placed in his films on an online platform (in the Interpretation it is referred to as ‘Y’, but it can be assumed that it is a platform that allows to place videos of its own, such as YouTube).

Therefore, the taxpayer decided to classify the above revenues as renting of the Internet space for the advertising concerned. In that case, they would be taxed on a registered lump sum, i.e. at 8.5% in case of rental 100,000 PLN and 12.5% above that amount.

In its request for an individual interpretation, the taxpayer also stressed that he did not sign contracts with the Internet platform, but accepted the conditions for joining the partnership programme.

However, his doubts raised a fragment of the interpretation of the individual Director of the Tax Chamber in Łódź from 3 November 2015 (IPTPB1/4511-462/15-4/AP):

„Since the receipt of revenue for the placement of online advertisements provided by X in Y, owned by X by a natural person (the Applicant), does not fulfil the conditions of non-agricultural business activity specified in Article 5a(6) Income Tax Act on individuals, as well as there are no features and elements that would qualify them for sources of revenue listed in Article 10(1)(2)(4-8) the abovementioned Act, this income should be eligible for revenue from other sources referred to in Article 10(1)(9) with regard to Article 20(1) that law.’[1]

The taxpayer asked how to qualify the revenue from advertisements placed in his films on the Internet platform, or as revenue from the rent of advertising space on a website taxed with a flat-rate registration or as income obtained from "other sources" on general terms subject to income tax from individuals? According to the taxpayer, qualification according to first The way. However, the Director of National Tax Information found this position incorrect.

In the explanatory memorandum, it was pointed out that the activities of the taxpayer, i.e. posting films on the Y platform, and then obtaining remuneration for advertising displayed during the reproduction of the films concerned, are not a business activity within the meaning of Article 5a(6) Personal Income Tax Act[2]. The applicant was not the author of the advertising data, he did not put them on the platform, but only agreed to display them while playing his films.

At the same time, which is equally important, through the above consent, the taxpayer did not lease the "hosting internet space". As highlighted in the explanatory memorandum to the Interpretation, “the video does not become the Internet space of the Applicant, which the Applicant may have by entering into leases or leasing rights.

In particular, it follows from the description of the case that the applicant has accepted the terms of the Y. and not that he has concluded contracts concerning the lease or lease of Internet spaces. Thus, there is no reason to qualify its revenue as sourced from Article 10(1)(6) Act.’

The Director of National Tax Information also considered that the income of the taxpayer is not a property rights revenue. Yes, the applicant is the author of films posted on the Y platform, but did not obtain revenue from copyrights to them. He only obtained revenue from advertising playback.

In view of the above arguments, the Director of National Tax Information stated that the income of the taxpayer should be classified as revenue from other sources referred to in Article 20(1)[3] with regard to Article 10(1)(9) Personal Income Tax Act. Therefore, the income in question cannot be taxed at a lump sum on recorded revenue.

Finally, it was pointed out that, in the case at hand, revenues are taxed on the so-called general principles, according to the tax scale, and the taxpayer is required to demonstrate them in the tax return PIT-36.

6) business activity or non-agricultural business activity - this means gainful activity:

• (a) manufacturing, construction, commercial, service,
• (b) the exploration, recognition and extraction of minerals from deposits,

(c) the use of goods and intangible assets

• in its own name, irrespective of its outcome, in an organised and continuous manner from which the revenue generated is not included in other revenue from sources listed in Article 10(1)(1)(2)(4-9);

Written by Michał Zdanowski

Tax consultant in Russell Bedford Poland. Graduate of the Faculty of Law and Administration

University of Warsaw, Graduate of the Postgraduate Tax and Tax Law Study of the University of Warsaw, Graduate of the Postgraduate Accounting and Finance Studies of the Warsaw School of Economics. During his studies, he gained experience in law and tax law firms. Since September 2013 He is associated with Russell Bedford Poland. It specialises in documenting transactions between related parties.