Join GAE
FAQ
Global Advisory Experts Logo
Global Advisory Experts Logo

Find a Global Law Expert

Specialism
Country
Practice Area

Awards

Since 2010, the Global Law Experts annual awards have been celebrating excellence, innovation and performance across the legal communities from around the world.

David Rotfleisch on Social Media Influencers Earning from Instagram, WhatsApp, YouTube, Reddit, Pinterest, Facebook and TikTok: How They Are Taxed in Canada?

posted 6 months ago

People have discovered new ways to share their passions, show their creativity, and create profitable businesses in the always-changing world of social media. Particularly, influencers have risen to prominence by gaining huge numbers of “followers” and using their online presence to make money. But along with this newfound achievement comes the duty to fully understand the tax repercussions related to earning through social media platforms.

Social Media Influencers: Who Are They?

Influencers are not necessarily those who regularly use and post on social media. The term “social media influencer” refers to a person or, sometimes a group of people, who have amassed a sizable fan base and influence on social media platforms like Instagram, YouTube, TikTok, Twitter, or Facebook. Influencers may impact the thoughts, actions, and purchasing decisions of their followers through their content, which sets them apart from other social media users.

Creating and sharing content of a particular niche or area of interest, like beauty, travel, fashion, technology, lifestyle Vlogs or fitness, is what social media influencers typically do. Posts, videos, narratives, and live streams are used for engaging with their followers.

Through their openly expressed thoughts, social media influencers can play a significant role in raising brand awareness and changing customer behavior. Many businesses are aware of the benefits of working with social media influencers to reach their target market, improve brand visibility, and boost sales. Influencer marketing has therefore become a popular strategy adopted by businesses, which entails paying social media influencers.

I’ve become a Social Media Influencer – What’s next for me?

It is very important to remember that as a social media influencer based in Canada, you are required to declare all of your earnings to the Canada Revenue Agency (CRA). According to section 3(a) of the Income Tax Act, all income, whether earned domestically or abroad, is taken into account when calculating a taxpayer’s taxable income. In order to calculate taxable income, payments received while on a brief (or long) international trip must also be taken into account, as must the cost of the trip if it is received as part of social media remuneration.

Your tax returns may be subject to penalties and interest charges if you fail to disclose your income or provide inaccurate information. If the CRA considers that the social media influencer taxpayer has shown intentional disregard for his or her tax obligations, such as by filing erroneous returns not reporting all income, or participating in fraudulent activity, the CRA may additionally apply gross negligence penalties under sections 162 or 163 of the Income Tax ActProsecution for tax evasion is also a possibility.

The disclosure of these earnings is also required for influencers who receive cryptocurrency payments. The fair market value of the cryptocurrency at the time of receipt must be recorded as income since cryptocurrency transactions are considered taxable events by the CRA.

To track unreported earnings from social media activities, the CRA uses a variety of techniques. They might carry out tax audits or compare data obtained from financial institutions, advertising agencies, or third-party payment processors using data-matching tools. Aside from keeping an eye on social media, and in particular, looking for social media influencers, CRA will also look into influencers’ taxes. Influencers must correctly disclose their income and make sure it corresponds to the receipts issued by the businesses that employ them.

If taxpayers want to voluntarily correct errors in reporting, they can amend past income that was not reported to the CRA or was reported inaccurately. With the help of the CRA’s Voluntary Disclosures Program, taxpayers can come forward and update their prior tax returns. Influencers who voluntarily disclose previously unreported income may avoid or lessen the fines and interest that the CRA might otherwise impose. Social media influencers who have undisclosed income should consult with a knowledgeable Toronto tax lawyer to find out if they qualify for the Voluntary Disclosure Program.

Tax Pro Tips – Social Media Influencers Need To Have a Clear Understanding Of Their Tax Obligations

Influencers on social media are obligated to report any earnings from their online activities in filing their tax returns. These include both monetary and non-monetary compensation, such as gifts in each lieu of product endorsements, sponsored travel, and PR packages. Cryptocurrency should be included in all non-monetary income and reported at its fair market value. If this income is not reported, there may be fines, interest charges, and even possible criminal tax evasion charges. To avoid any tax-related complications, an expert Canadian tax lawyer can make sure that you accurately report all of your income or assist you with a voluntary disclosure program (VDP) application if you have failed to report some income in the past.

Registration by social media influencers for the Goods and Services Tax/Harmonized Sales Tax (GST/HST) may also be required, in addition to the income tax reporting and filing requirements. Depending on the scope of their activities, influencers must register, collect, and remit GST/HST on their taxable sales if their taxable supply exceeds $30,000 over 4 consecutive quarters or a period of 12 months. To ensure compliance with tax rules, speak with an experienced Canadian tax lawyer to become informed about the GST/HST registration requirements and procedures.

FAQs

At what point does my utilization of social media qualify as a business activity?

The Canada Revenue Agency (CRA) will see you as a business entity if you generate income through social media. This business activity may include earnings from sponsored posts, affiliate marketing, product placements, or other revenue streams that use your social media as a conduit for what would otherwise be regarded as a taxable supply. There is no minimum amount that does not have to be reported. Every dollar of social media influencer income, no matter how minor, has to be reported. However, because every tax circumstance is unique, it is crucial to speak with a Canadian tax lawyer to be sure you are not dodging your tax duties.

Is it permissible to claim deductions for expenses related to my social media activities?

Yes, in a nutshell, but there are a lot of factors to take into consideration. Only a limited number of acceptable expenses may qualify as deductions; these expenses must not only be directly related to the business but also be properly documented. Keeping track of all your earnings, expenses, invoices, receipts, and other pertinent financial records is, therefore, a must. Additionally, you should also keep a record of your correspondence and payments from sponsors and supporters. Engage a reputable Canadian Tax Lawyer’s assistance to ensure that you know your obligations regarding Canadian tax reporting.

What steps can I take to ensure proper disclosure of my social media income?

The first step to making sure you know how much you earned through social media and what expenses you paid out while doing it is to document your income and track your expenses along with related receipts. It is thus necessary to separate your personal and social media finances. A good method to prevent financial complications is to keep your business and personal credit cards and bank accounts separate. For effective methods of tax planning for your social media business, get in touch with an expert Canadian tax lawyer.

Disclaimer:

“This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the articles. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.”

Author

Join

0
who are already getting the benefits

Sign up for the latest advisory briefings and news within Global Advisory Experts’ community, as well as a whole host of features, editorial and conference updates direct to your email inbox.

Naturally you can unsubscribe at any time.

About Us

Global Advisory Experts is dedicated to providing exceptional advisory services to clients around the world. With a vast network of highly skilled and experienced advisers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.

Stay Informed

GAE