SARS wants R500 billion from these South Africans

The South African Revenue Service (SARS) clarified that social media influencers form a new taxpayer segment and, like all others, must declare and pay tax on all income earned, whether in cash, products, or services.

Recently, SARS expressed that it is looking to recover over R500 billion in unpaid taxes made from online content creation. However, experts have estimated that SARS can collect even more from influencers.

As social media becomes increasingly popular and influential, many South Africans are using it to generate income.

Brands are also taking note of the reach influencers have and are shifting their marketing to include these social media stars.

However, influencers often do not know their tax obligations and, therefore, do not always declare their incomes correctly or even at all. Now, the taxman is taking note of this group.

In response to the information circulating about the taxation of social influencers, SARS clarified its position with respect to this category of taxpayers.

“SARS’s legal mandate is to collect all revenue that is due to the state, improve tax compliance, and facilitate legitimate trade,” the taxman said.

“SARS delivers this mandate through its strategic intent to develop and administer a tax and customs system based on voluntary compliance.”

The revenue service explained that its compliance theory is underpinned by an assumption that all taxpayers are honest and want assistance to comply with their obligations.

To help honest taxpayers who are willing to comply, SARS said that it provides clarity and certainty to taxpayers and traders regarding their tax obligations and makes it easy for taxpayers and traders to comply.

“SARS is aware that not all taxpayers’ needs are the same. SARS is organised into segments, enabling the organisation to serve various taxpayers’ needs,” the taxman said.

“Complementing this segmentation is our use of data to augment efforts to deepen a culture of voluntary compliance while managing risks.”

SARS said it has been expanding its segmentation model, and recognises the following groups:

• Standard taxpayers (comprising taxpayers with a single income and simple returns)
• Large and International Businesses
• High Wealth Individuals
• Public Benefit Organisations
• Prominent and Related Entities
• Estates
• Tax Practitioners
• Employers

“The latest additions to this segmentation model are National and Provincial Government, Social Influencers, and the Gig Economy,” it said.

Influencers’ tax obligations

According to SARS, the social influencers segment comprises modern entrepreneurs, who can be classified as sole proprietors or independent contractors.

“These are technologically savvy individuals who have identified a niche in the market to provide a generalised offering that leverages their social following,” the taxman said.

SARS clarified that, when managing this segment, it will handle each situation on a case-by-case basis according to current income-tax brackets. “Some of these cases may generally fall into the provisional taxpayer category,” it said.

This category means that influencers need to declare their total estimated taxable income on their provisional tax returns (IRP6) and pay the applicable tax thereon.

In other words, they estimate the amount they will earn in the current tax year and pay that tax upfront. If they overestimate or underestimate this amount, it can be topped up throughout the year or refunded at the end of the tax year.

SARS said that for each segment, it has an engagement model. The first step is always to provide clarity and certainty and to make it easy for taxpayers to comply.

“We work with and through stakeholders and partners to deliver SARS’s mandate. This segment format will specifically serve this group of taxpayers and ensure compliance,” the taxman said.

Regarding the new segments, such as social influencers, SARS said that it understands that traditional marketing campaigns are increasingly digitising through smart technologies.

“SARS is generally finding that most marketing budgets are contracting social personalities to lend their image to digital platforms,” it said.

“This is a shift away from established marketing houses toward individuals with a sizeable following.”

Often, companies offer influencers payment “in kind”. This means that although they may not receive cash for promoting a certain brand, they may be given products or even a vacation.

However, these benefits have to be declared as part of the influencer’s taxable income, a fact many of them are completely unaware of.

“As the marketing spend-mix changes in response to these shifts, SARS is also adapting its educational and compliance initiatives,” the taxman said.

“Undeniably, digitisation and attendant economic activities have fundamentally changed the world of work, and the gig and sharing economy are critical in this respect.”

Working with influencers

How much tax someone has to pay depends on their tax bracket. Tax brackets are determined by income as defined in Section 1 of the Income Tax Act.

According to SARS, third-party data is crucial in determining where each taxpayer must be allocated in terms of income bracket.

This means that SARS has access to taxpayers’ bank accounts and spending data, and can flag if there appears to be a misalignment.

“It must be reiterated that it remains the social influencers’ legal obligation to declare all income received,” the taxman stressed.

“Full voluntary disclosure is critical. No matter how social influencers are remunerated – whether with products, services, or travel – all of these are deemed as income (ITA) and must be taxed accordingly.”

In line with its compliance theory, SARS believes taxpayers are honest: when they are clear and certain of their obligations, they comply voluntarily. Similarly, it said influencers will declare honestly when adequately educated.

In this regard, SARS has prepared products and videos to help these taxpayers meet their obligations. “SARS aims to do much more in terms of outreach and education,” it said.

The revenue service will also provide seminars, webinars, and rulings to educate taxpayers about their obligations.

“Although the social-influencer segment has its own nuances, it is no different to other taxpayer segments in that income earned must be disclosed and taxed. Freelance work is similar,” SARS explained.

The taxman urged citizens working as social influencers to declare income earned from brand collaboration, sponsored content, and affiliate marketing, whether they have been paid in cash, products, or services.

It added that these taxpayers, like all others, are making a significant contribution to the health of the country and its democracy.

“SARS is looking forward to working with this segment to provide clarity and certainty, but also to provide them with a seamless taxpayer experience,” said SARS Commissioner Edward Kieswetter.

“SARS is more than willing to assist honest taxpayers to comply with their tax obligations. I am reminding social influencers to uphold their end of the bargain.”