Introduction
The increasing commercialisation of social media has transformed many influencers and content creators from individuals posting online into sophisticated businesses generating substantial income through sponsorships, advertising, affiliate arrangements, product sales and personal branding. At the same time, the distinction between personal lifestyle and business expenditure has become increasingly blurred. Influencers frequently acquire luxury vehicles, designer handbags, watches, jewellery and similar items which feature prominently in their content and personal brand.
As influencer activities become more commercial in nature, some influencers continue to operate in their own name, whilst others conduct their activities through companies. This gives rise to several questions under the UAE Corporate Tax regime, including when an influencer becomes subject to Corporate Tax, whether the tax position differs depending on the legal structure through which the activity is conducted, and whether expenditure on luxury items may be deductible.
Neither Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”) nor the guidance currently issued by the Federal Tax Authority (“FTA”) specifically addresses the deductibility of luxury expenditure incurred by influencers and content creators. Whilst the FTA has issued guidance on the taxation of influencers generally, the treatment of luxury items such as vehicles, handbags and watches remains to be determined by reference to the general principles of the Corporate Tax Law.
Nevertheless, the Corporate Tax Law provides a sufficient framework through which these issues may be analysed. This article therefore considers when influencers become subject to Corporate Tax, the significance of operating personally or through a company, and the extent to which expenditure on luxury items may properly be regarded as deductible business expenditure.
When Does an Influencer Become Subject to UAE Corporate Tax?
The UAE Corporate Tax regime applies not only to juridical persons, but also to natural persons conducting a Business or Business Activity in the UAE. Article 11 of the Corporate Tax Law provides that a natural person conducting a Business or Business Activity in the UAE is a Taxable Person. Article 1 of the Corporate Tax Law further defines a “Business” broadly as any activity conducted regularly, on an ongoing and independent basis, including commercial, professional and service activities.
Accordingly, an influencer may become subject to Corporate Tax where their activities move beyond occasional social media use and constitute a regular commercial activity. This may include entering into sponsorship, endorsement or advertising arrangements, receiving recurring income from content creation, promoting products in exchange for cash or in-kind consideration, or selling products, subscriptions or merchandise.
Pursuant to Article 2(1) of Cabinet Decision No. 49 of 2023 on Specifying the Categories of Businesses or Business Activities Conducted by a Resident or Non-Resident Natural Person that are Subject to Corporate Tax, a natural person is only subject to Corporate Tax where the total turnover derived from Business or Business Activities conducted in the UAE exceeds AED 1 million within a Gregorian calendar year.
The FTA has expressly confirmed this position in its Corporate Tax Guide on the Taxation of Natural Persons, which refers to an influencer who derives income from sponsored content and brand campaigns, including “in-kind” consideration such as products received from brands. The FTA confirms that such activity constitutes a Business or Business Activity for Corporate Tax purposes and that the Market Value of in-kind consideration forms part of the influencer’s turnover. Accordingly, where an influencer receives designer goods, travel, accommodation or similar benefits in exchange for content, the Market Value of those benefits may need to be included when determining whether the AED 1 million threshold has been exceeded.
Operating Personally vs Through a Company
Once an influencer is carrying on a Business or Business Activity, the Corporate Tax position may differ depending on whether the activity is conducted in their capacity or through a company. Where the influencer operates in their own capacity as an individual, the individual is the Taxable Person. The income and expenditure of the Business are therefore attributed directly to the individual. By contrast, where the activity is conducted through a company, the company itself is the Taxable Person. The company is therefore subject to Corporate Tax on its Taxable Income, whilst the influencer remains legally distinct from the business.
This distinction is significant because operating through a company does not automatically convert personal expenditure into deductible business expenditure. Rather, it becomes necessary to distinguish between expenditure incurred by the company for the purposes of its Business and expenditure which, in substance, reflects the private lifestyle of the owner or director.
This is also reflected in Article 20 of the Corporate Tax Law, which requires Taxable Income to be determined by reference to accounting income subject to the adjustments prescribed by the legislation. Article 33 of the Corporate Tax Law, which restricts the deductibility of dividends, profit distributions and certain benefits of a similar nature provided to the owner of a Taxable Person.
Relevant Corporate Tax Principles
The starting point for determining whether expenditure on luxury items is deductible is Article 28 of the Corporate Tax Law which requires that such expenditure be incurred wholly and exclusively for the purposes of the Business. It should also be noted that the acquisition cost of a luxury vehicle, watch, handbag or similar item may constitute capital expenditure rather than an immediately deductible expense. In such cases, the issue is not whether the entire purchase price may be deducted in the year of acquisition, but whether any accounting depreciation, amortisation or associated running costs may properly be recognised for Corporate Tax purposes. Where expenditure is incurred for more than one purpose, only the identifiable business portion, or an appropriate proportion determined on a fair and reasonable basis, may be deducted. Accordingly, the relevant question is not whether a luxury item appears in content, but whether the expenditure was genuinely incurred for the production of taxable business income.
The distinction is relatively straightforward in the case of ordinary business expenditure. Camera equipment, editing software, lighting, travel costs for a sponsored campaign and studio rental would generally have a sufficiently direct connection to the business. However, the position is significantly more complex in relation to luxury items which are capable of personal use.
Luxury Vehicles
A luxury vehicle may, in limited circumstances, qualify as deductible expenditure where there is a clear and direct nexus between the vehicle and the influencer’s Business Activity. This may be the case, for example, where the influencer operates an automotive review business, creates sponsored content relating specifically to luxury vehicles, and uses the vehicle solely for use in commercial filming and promotional activities.
Consider a Dubai-based content creator whose business consists primarily of reviewing luxury vehicles and producing sponsored content for automotive brands. The creator rents a Ferrari through their company, uses the vehicle exclusively for filming and test drives, and maintains detailed mileage logs, sponsorship agreements and production schedules. In those circumstances, the costs have been incurred for the purposes of the Business. However, where the asset has an inherent personal or lifestyle function, the deductibility analysis may remain sensitive to the precise facts, the extent of private use and the quality of the supporting evidence.
By contrast, a fashion or lifestyle influencer who rents a luxury vehicle primarily for personal use is unlikely to be entitled to a deduction merely because the vehicle occasionally appears in photographs or videos. The incidental appearance of a Lamborghini, G-Wagon or Rolls-Royce in social media content is unlikely, in itself, to satisfy the “wholly and exclusively” requirement.
For example, assume that an influencer rents a Lamborghini through their company. The vehicle appears periodically in Instagram stories and TikTok videos, but is also used for daily commuting, personal travel, weekends and social events. In these circumstances, there is a significant risk that the expenditure could be regarded as primarily personal in nature rather than incurred for the purposes of the Business.
Accordingly, costs would be unlikely to be fully deductible for UAE Corporate Tax purposes. Even where a degree of business use can be demonstrated, only a clearly identifiable business proportion of such expenditure is likely to be deductible. This would be subject to the Taxable Person maintaining adequate and contemporaneous evidence to support a reasonable and consistent apportionment between Business and private use.
Designer Bags and Luxury Goods
Similar considerations arise in relation to designer handbags, jewellery, watches and other luxury accessories. In principle, there may be scope to argue that expenditure on such items is deductible where they are acquired exclusively for use in content creation, advertising campaigns, product placement or similar commercial activities, although the position is likely to remain sensitive where the item also has an evident personal or lifestyle function.
Assume that a beauty influencer enters into a paid collaboration with a luxury retailer and acquires ten designer handbags through their company for use in a specific campaign. The handbags are photographed and filmed as part of the campaign, retained by the company for future commercial use, and are not used personally by the influencer. In those circumstances, there may be a supportable argument that the expenditure was incurred for the purposes of the Business. However, where the item is also capable of ordinary personal enjoyment or lifestyle use, the position is unlikely to be free from doubt and would remain highly fact-sensitive.
However, where the same items are also used privately, the position becomes significantly more difficult. For example, consider an influencer who acquires a Hermès Birkin bag through their company and later uses it at restaurants, holidays and personal events, whilst also occasionally featuring it in sponsored content. Although the bag may arguably have some business use, there is a substantial risk that the expenditure could be characterised as primarily personal in nature, such that a deduction could be denied in full or limited to a clearly identifiable business proportion.
Mixed Business and Personal Use
The UAE Corporate Tax regime recognises that certain expenditure may be incurred partly for business purposes and partly for personal purposes. This is consistent with the FTA’s Corporate Tax Guide on Determining Taxable Income (“DTI Guide”), which confirms that where expenditure has both business and private elements, only the portion that is attributable to the Business may be deducted, determined on a fair and reasonable basis. In such cases, only the business portion may be deducted, determined on a fair and reasonable basis.
This principle is particularly relevant in the context of influencers, given that their personal identity and lifestyle often form part of their business model. Nevertheless, the fact that an item contributes to an influencer’s public image does not automatically transform a personal expense into a deductible business expense. In practice, a Taxable Person seeking to claim a deduction should maintain robust evidence demonstrating the extent of business use. Depending on the nature of the expenditure, relevant evidence may include sponsorship agreements, filming schedules, invoices, mileage logs and records demonstrating that the item is retained by the business and not used privately. Without adequate documentation, the FTA may be unwilling to accept that any business deduction is available.
Related Parties and Connected Person Considerations
Where the influencer owns or controls the company, Articles 34 and 36 of the Corporate Tax Law are engaged. Transactions or arrangements must satisfy the arm’s length standard, and any payments or benefits provided to the owner or other Connected Persons must correspond to Market Value and be incurred wholly and exclusively for the purposes of the Business.
This distinction is important. Even where an arrangement can be supported on arm’s length principles, a deduction may still be denied where the expenditure reflects a personal benefit rather than a genuine business cost.
Accordingly, where a company acquires a luxury car, handbag or similar item which is primarily enjoyed by its owner, there is a material risk that the expenditure will be characterised as personal in nature. This risk is particularly acute in owner-managed structures, where the boundary between personal and business use is inherently blurred.
General Anti-Abuse Rule
Article 50 of the Corporate Tax Law contains a general anti-abuse rule, pursuant to which the FTA may disregard or recharacterise arrangements where one of the main purposes is to obtain a Corporate Tax advantage and the arrangement is not supported by sufficient commercial or other non-fiscal reasons.
The mere fact that expenditure is incurred through a company, or that an item features in social media content, will therefore not be determinative. The FTA is likely to consider the commercial substance of the arrangement, including the extent of personal use and whether the expenditure would have been incurred in the absence of the business.
Where a company acquires a luxury item that is primarily enjoyed by its owner, the FTA may look beyond the form of the arrangement and focus instead on its underlying substance. A structure under which personal lifestyle expenses are simply routed through a company is unlikely to withstand scrutiny.
Practical Considerations
The absence of specific legislative guidance means that the treatment of luxury expenditure incurred by influencers is likely to depend heavily on the facts and circumstances of each case. In practice, the key issue will usually be whether the expenditure would have been incurred in the absence of the business, and whether the Taxable Person can demonstrate a sufficiently direct connection between the item and the production of taxable business income.
This makes contemporaneous documentation particularly important. Depending on the nature of the expenditure, relevant evidence may include sponsorship agreements, filming schedules, invoices, mileage logs, content plans and records demonstrating how and when the item was used in the business. Where substantial private use exists, or the commercial rationale for the expenditure is unclear, the FTA may be reluctant to accept that any deduction is available beyond a clearly identifiable business portion.
As a practical matter, influencers and owner-managed companies should exercise caution before seeking to incur luxury expenditure “through the business”. While certain items may be capable of deduction where they are used exclusively, or to a demonstrable extent, for commercial purposes, the position is far less certain where the expenditure also serves a personal lifestyle function. In such cases, a conservative approach, supported by contemporaneous evidence and clear internal records, is likely to be the most defensible position in the event of FTA scrutiny.
Conclusion
The UAE Corporate Tax regime does not prevent influencers and content creators from claiming deductions in respect of luxury items where there is a genuine, demonstrable and appropriately documented business purpose. However, the fact that a luxury item appears in social media content will rarely, by itself, be sufficient. Luxury vehicles, handbags, watches and similar items are only likely to give rise to deductible expenditure where there is a clear nexus with the Business, adequate evidence of commercial use and, where relevant, a fair apportionment to exclude personal use.
In many cases, the acquisition cost of such items may also constitute capital expenditure rather than an immediately deductible expense. Where expenditure primarily reflects personal lifestyle rather than genuine Business Activity, routing the expense through a company is unlikely to change its character and may instead increase Corporate Tax risk.
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