The world of digital marketing has changed drastically since the days of newspaper ads and billboards. Companies are now turning to social media to grow their brands and brand visibility. One of the many social media phenomena that’s grown quite significantly is influencers and influencer marketing.
Earlier this year, the South African Revenue Services (SARS) expanded its segmentation model to include social influencers, which led to influencers being classified as sole proprietors or independent contractors. The addition of social influencers meant that they must comply with income tax laws when remunerated, whether with products, services or travel.
Edward Kieswetter, SARS Commissioner, said that “SARS is looking forward to working with this segment (influencers) to provide clarity and certainty, but also to provide them with a seamless taxpayer experience”. He stressed that “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”.
In this article, we break down the influencer market, the compliance requirements and how influencers can ensure compliance.
Freelance vs Independent Contractor
In South Africa, the terms freelancer and independent contractor can be used interchangeably; however, the difference lies in the formality of the contract. Freelan
cers set their own rates, payment terms and working patterns, with complete independence over how they work and when they work. Typically, freelancer deadlines are set in negotiation as freelancers have to fit the work around other commitments.
On the other hand, independent contractors will have a more regular working relationship with your business but still be separate from your company. For example, your business might need a developer but not on a full-time basis, to justify full-time employment. Contractors often work on much larger and long-term projects and may work on-site at your office.
Independent Contractor Taxes in South Africa
Because influencers are seen as independent contractors under South African tax laws, they need to follow independent contractor compliance laws.
Income Tax of Independent Contractors
Independent contractors do not receive IRP5 certificates. They must file an annual tax return (ITR12) and declare all income and authorised expenses to enable an accurate calculation of taxable income. Additionally, they must retain complete financial records and supporting documentation of up to five years in case SARS requests an audit.
Provisional Tax for Independent Contractors
Independent contractors’ income is not subject to Pay-As-You-Earn (PAYE), meaning most qualify as provisional taxpayers. This means that they must pay SARS directly and in advance using provisional tax payments. Use the IRP6 forms to submit these payments.
Payment dates are as follows:
- 1st payment by 31 August
- 2nd payment by the end of February
- 3rd payment (optional top-up) by 30 September
Deductible Business Expenses
Independent contractors have the advantage of being able to deduct eligible business expenses from their income. This enables them to significantly minimise tax liability.
Some deductible expenses include:
- Office and equipment expenses such as rent, Internet, computers and software.
- Travel and vehicle-related expenses, such as business-related fuel and maintenance.
- Professional fees such as accountants, lawyers and subscriptions.
- Marketing and advertising expenses like website, ads and business cards.
These deductions must be supported by relevant paperwork such as receipts, invoices and logs.
VAT Considerations
If an independent contractor has a turnover exceeding R1 million in any 12-month period, they are legally required to register for VAT, which can be done through the SARS filing system. Once registered, they must issue valid tax invoices and submit VAT201 returns every two months. For some, VAT registration can add credibility and allow them to recover input VAT on expenses.
Becoming an Influencer in South Africa
Now that you have a better understanding of the tax requirements for influencers, here are a few steps to start your influencer journey.
Step 1: Find Your Niche
To stand out among the many influencers we have in South Africa, you need to carve out a specific angle within your niche. This can mean doing anything from recreating old childhood recipes, assembling work outfits inspired by movie characters, to showing people homemade concoctions for cleaning homes.
Step 2: Set Goals
You need to establish clear goals to help you stay on track. You might be aiming for a certain number of followers or a certain level of engagement with your personal brand. Having clear goals will help you outline a clear content strategy and approach for more engaging and effective influencing.
Step 3: Create a Compelling Bio
A good social media bio showcases your personality and tells potential followers and brands who you are and why they should follow you. Your bio needs to be concise, accurate and unique. Consider adding elements such as emojis, a CTA and a link to your website/portfolio or other useful resources.
Step 4: Establish Your Aesthetic
Your aesthetic is the branding that helps followers identify your content quickly and easily. When curating your aesthetic, ensure your brand’s visual identity is present in all your posts, in your profile picture, and consistently across all social platforms you use.
Step 5: Engage with Your Audience
As an aspiring influencer, it’s important to remember that you are part of the community you are hoping to build. You need to regularly interact with your followers and send direct messages where possible. This will help increase visibility and encourage people to continue engaging with your content.
Step 6: Develop a Media Kit/Rate Card
Once you can demonstrate your impact as an influencer, you need to create your influencer media kit/rate card to send to prospective collaborators and brand partners. Your media kit sums up critical information such as your audience demographics, engagement analytics, content alignment and past campaigns.
Becoming an influencer and building an online presence takes time and effort, so you need to be patient. Leverage the above tips to ensure you build a successful online presence and remain compliant with tax laws.
