Tax Implications for Social Media Influencers: Navigating the Digital Economy

In the digital age, social media platforms have become more than just a place to share life updates and cat videos. They have transformed into lucrative income streams for many individuals known as ‘influencers’. These influencers, with their large followings on platforms such as Facebook (Meta), Instagram, Twitch, Twitter, YouTube, and even independent blogs, have found ways to monetize their online presence. Influencers span a wide range of occupations - they are content creators, bloggers, photographers, journalists, fitness coaches, fashion promoters, business consultants, entertainment workers, and much more. Their content consistently engages a broad audience of users who interact with it regularly.

However, with this new form of income comes a complex web of tax implications. This blog aims to shed light on these tax considerations, helping influencers navigate the often confusing landscape of taxation in the digital economy. Stay tuned as we delve into the world of likes, shares, and tax brackets. Whether you’re a seasoned influencer or just starting out, this guide is designed to help you understand your tax obligations and plan accordingly.

Influencers earn income through variety of means namely (source: canada.ca):

subscriptions to their content and social media channel(s)

advertising for other businesses

collaboration with other influencers/businesses

partnerships with other brands/influencers/businesses

sponsorships from other brands/businesses

tips from followers and social media audiences

gifts from followers and social media audiences

donations from followers and social media audiences

trips from brands and sponsors

referral codes for merchandise/goods promotion

Regardless of how an influencer earn their income, there are obviously taxation implications which they need to consider. As an influencer resident in Canada, you must report all such income (monetary and non-monetary) earned inside and outside of Canada. Report and pay tax on all income earned on social media platforms as self-employment income by completing Line 26000 of your income tax and benefit return and Form T2125, Statement of Business or Professional Activities. Influencers who are not resident in Canada are subject to Canadian income tax on most Canadian-sourced income paid or credited to them during the year unless all or part of that income is exempt under a tax treaty.

If a gift is non-monetary, such a first-class airline ticket to Aruba, the social influencers are required to declare the fair market value (FMV) of the ticket as other income on their Form T2125. Non-monetary gifts, also known as gifts-in-kind or in-kind contributions, are exchange or donations of goods or services rather than cash. They can include a wide range of items such as real estate, stocks and bonds, personal items like furniture, clothing, electronic goods, intellectual property, and more.

As with any self employment income, social influencers can deduct a variety of expenses from their income as long as the expenses are reasonable. Some of these expenses are:

Depreciation of IT and Photography Equipment: If you’re a social media influencer in Canada, you can claim the Capital Cost Allowance (CCA) or depreciation on your equipment when filing your taxes. This means you can deduct a portion of the cost of your equipment each year as an expense as it depreciates.

Automotive Expenses: If you use your vehicle for both personal and business purposes, you can claim a portion of your vehicle expenses on your taxes. The amount you can claim is proportional to how much you use the vehicle for business.

In some cases, the social influencer may not be an individual, but a corporation. A corporation is a legal entity that is separate from its shareholders and directors. A corporation can also create and publish online content on social media platforms and earn income from various sources, such as advertising, sponsorships, partnerships, etc. However, the tax implications for a corporate influencer are different from those of an individual influencer. A corporate influencer must file a Corporate Income Tax Return (T2) and pay tax on its taxable income at the applicable corporate tax rate. The corporate tax rate depends on several factors, such as the type of corporation, the province or territory where it operates, and the amount of income it earns.

There are also Harmonized Sales Tax or HST implications for social influencers if the income derived from their taxable supply, or in simpler words their online content, exceeds $30,000 over four calendar quarters. In such event, they are required to register for GST/HST with the Canada Revenue Agency (CRA). Once registered, influencers are obligated to collect and remit the related GST/HST to the CRA. If the social influencer has already registered for GST/HST, he/she may be eligible to claim Input Tax Credits (ITC) for the GST/HST paid on purchases and expenses related to their commercial activities. However, a claim for an input tax credit can only be made when GST/HST is payable on business activities. Simply put, if you have no income, you can not claim input tax credit (ITC).

As with any other business, if social influencers are claiming any expenses on their tax returns, they are required to maintain their receipts for at least six years in the event of an audit by the CRA.

For further information please contact Taxtron Support at 416-491-0333 or visit www.taxtron.ca