If you want to start your business by creating content on one of the social networks or if you are already doing it, do you know what obligations apply to you according to Serbian law?
The first thing we want to clarify is the existence of a misconception that influencers (freelance) do not pay taxes. This assumption is mostly incorrect, and here’s why. If a company/brand wants to hire a person to advertise their services/products on a social network (usually Instagram), they will first decide on someone who has a wide audience (a large number of followers). Most of the influencers who are engaged in this business as a basic source of income, have a large number of followers and publish advertising content for various companies, and have a registered activity. This is precisely what is important to brands when choosing, because such engagements are regulated by contract, and payment is made on the basis of an invoice. This is a prerequisite for the realization of such a job. Of course, here we are talking about conditionally speaking “bigger” companies/brands that have chosen this type of marketing for their products, as well as influencers who are professionally engaged in this modern activity and whose work is supported by a team of people.
When registering your business, you can choose to establish a limited liability company or an entrepreneur, depending on your business needs. Thus, as a registered legal entity, the influencer pays tax that depends on the form of the legal entity (flat rate or bookkeeping).
Of course, we cannot fail to mention the large number of people present on social networks who, although they have a large number of followers, do not actually engage in content creation as an activity. In addition to them, there are also those who advertise individual companies, where in return they receive a gift of the product they advertise. However, in those situations, we cannot talk about influencers who have a registered company, about the existence of a contract for such work, or about a brand that invests large amounts of money in this type of marketing. Also, there is a large number of profiles that sell clothing and various other products, for which they have not registered in accordance with the law. In addition, there is an increasing number of “micro-influencers”, as well as those who mark a certain brand themselves without any monetary compensation, so precisely because of all the listed phenomena, one gets the impression of disorder in this area and the existence of space for “illegal work” (or generally non-payment of taxes from side of the influencer).
In one of the previous blogs, we dealt with the “Application of positive regulations to contracts with “influencers”, and we concluded that this new activity is still not sufficiently regulated in domestic law. The relations between the client of the work and the “influential person” can be regulated by the Law on obligations, the Consumer Protection Act, the Advertising Act. The Law on Obligations regulates the relationship between the contracting parties, where it is important to determine the scope and type of work performed, the way in which the influencer will market a product or service, the value and duration of the contracted work, etc. It is also very useful to determine whether it is exclusivity, which in that case would limit the influencer from advertising other brands of the same type, and accordingly determine compensation, or penalties in case of violation of certain contractual clauses.
However, since the aim of advertising is to market products or services to third parties, it is very important to take into account the provisions of the Consumer Protection Act that precisely protect those third parties as the end users to whom the advertisement is intended, and in order to avoid a possible violation of their rights . In Serbia, there is no obligation to put the mark “paid partnership”, which for the end user is important information that the influencer has received monetary compensation for advertising a certain product, which affects the evaluation of the product by the customer as the end user.
*It should be noted the measures taken by Instagram itself, in response to the efforts of the US Federal Trade Commission (FTC) to stop “infringers”. Namely, a few years ago, Instagram introduced the label for “paid partnership” for the sake of transparency between the company that markets the product and the consumer. Apart from this, the agency (FTC) hoped that there would be less dishonesty in advertising. Also, the goal is to promote honest and accurate marketing, which should be honest, exactly what consumers need. Finally, consumers have the right to know if they are being sold by someone who has been paid by the company. This option did not fully meet the agency’s requirements in terms of consumer protection, but it helped them considerably and enabled them to see that certain content was sponsored.
It is especially important that in such business relations between the client (brand) and the influencer, the question of intellectual property rights on the published content can also be raised, and this question can also be regulated by contract.
The conclusion we can draw based on the above is that the field of marketing on social networks, i.e. engagement of influencers for advertising is still insufficiently regulated by domestic regulations, and that this area will certainly be regulated additionally by laws in the future. From the aspect of tax obligations, there is also still no established system that could monitor and possibly sanction those who use social platforms for sales/advertising, for which they do not have a registered activity and do not pay tax. However, even now there are legal frameworks that can regulate the relationship between a brand as a client and an influencer in accordance with the law. So if you have decided to engage in this activity first:
– establish a company ( think carefully or consult with a lawyer about whether it will be limited liability company a or an entrepreneur)
– hire a bookkeeper or settle your obligations regularly
-always arrange your engagement with a contract that regulates mutual rights and obligations
Sources: -Advertising Law, Consumer Protection Law, Rich Drees “Instagram Paid Partnership Feature and FTC Support Guides” IGReviews.com
Law office Vesić Nikolić