South African tax residents are liable for tax on their worldwide income, being any amounts that fall into their gross income, which may further be subject to specific exemptions. The term gross income can, in essence, be defined as the total amount, in cash or otherwise, received by or accrued to or in favour of such resident. In recent years, the rise of social media platforms has given birth to a new breed of celebrities known as social media influencers, who are no different when it comes to tax and any income paid or accruing to them from sponsored posts, brand partnerships, affiliate marketing, and other forms of monetisation will be subject to tax in their hands.
Social media influencers will generally not be employed by a typical employer who will withhold the necessary tax on their salaries in the form of PAYE and will, therefore, be considered independent contractors as they work for themselves. Due to this, they will instead be required to register for provisional and file provisional tax returns with SARS if their income meets certain thresholds. This is a mechanism in which taxpayers estimate their taxable income for the year, requiring them to make prepayments at various intervals so they are not left footing a large tax bill when the tax payable becomes due.
As the social media influencers will generally be carrying on a trade, expenditure and losses actually incurred in the production of the income may be deducted, in so far that they are not of a capital nature. Examples of these expenses could include membership fees, transport, internet, and advertising. Expenses, in relation to an asset like a house or a car, are not deductible under the general deductions provision but may be deductible in other sections of the Income Tax Act.
Influencers may also be liable for VAT depending on the type of social media influencing, which generally depends on their annual turnover and whether a good or service is provided.
It is vital that influencers keep accurate records of all income and expenses so they can file accurate tax returns when the time comes. Due to the various complexities associated with this, it is vital that you reach out to your tax advisor should you have any uncertainty.