Finance

SARS has its eyes on these taxpayers

The South African Revenue Service (SARS) is increasingly taking note of the income generated by influencers in South Africa, with some making up to R35,000 for a single social media post. 

These additional earnings can create tax headaches for individuals, pushing them up a tax bracket or even making them provisional taxpayers. 

The South African influencer industry is rapidly becoming more lucrative, with it estimated to generate around R500 million in economic value each year. 

As digital marketing continues to grow and more companies use influencers to market their products, the industry is expected to be worth over R1 billion within the next five years. 

This makes it an increasingly important income stream for individuals and businesses involved in the creator economy. 

With the income of these individuals and businesses growing, they cannot afford to ignore the tax implications, said the managing director of Vintage Advisory, Luncedo Mtwentwe. 

Mtwentwe explained that the industry is also becoming increasingly formal with regard to how companies pay creators and the regularity of the services provided and payments received. 

As the industry becomes more formal and lucrative, it becomes easier for SARS to track the income generated by individuals and collect taxes. 

“Influencers have to really start taking themselves seriously in terms of treating themselves as sole proprietors or as businesses, with this decision having significant tax implications,” Mtwentwe told Business Day TV

Crucially, these earnings are also highly volatile, with income generated by influencers being seasonal and fluctuating based on trends and demand. 

Influencers can also be paid by international entities, which further complicates matters with regard to the amount earned and the sum owed to SARS. 

A further complication arises from payment in the form of promotional gifts from companies, which is harder for SARS to track but can be classified as income. 

Mtwentwe said that SARS is not out to get South Africans and punish taxpayers. Rather, it merely implements and enforces legislation to raise tax revenue for the state. 

The obligation is entirely on the taxpayer to declare all their income, including irregular earnings from influencer activities. 

“If you are generating any additional income through personal services or influencer marketing, that is something you have to declare to SARS,” Mtwentwe said. 

This is the most common mistake from influencers in South Africa, as there is a general lack of awareness with regard to what has to be declared or not. 

Undeclared income can result in severe penalties, so it is necessary to ensure that all income is declared regardless of its source. 

Typically, most people only declare their salaries and not irregular income sources, Mtwentwe explained. 

Another mistake influencers commonly make is that they do not realise they become provisional taxpayers once they start earning an income outside of their monthly salary. 

As no tax is withheld on cash payments or promotional gifts from companies to influencers, this income will have to be declared on a provisional tax return. 

This results in a significant change for individuals as they then have to declare their income every six months. 

Provisional taxpayers typically submit two provisional tax returns during the tax year and a final tax return with actual figures after the tax year ends.

A third payment is optional after the end of the tax year but before the issuing of the assessment by SARS.

This increases the likelihood of influencers falling foul of tax legislation and receiving penalties from undeclared income, Mtwentwe said. 

According to the 2023/24 tax statistics, South Africa currently has over 500,000 provisional taxpayers who contributed around R110 billion in assessed tax in the financial year.

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