Home » Do Canadian Social Media Influencers Need to Pay Taxes?
Imagine yourself an Instagram influencer with thousands of followers. You have been a personal shopper and stylist for many years, and you produce and share fashion-related videos on YouTube and Instagram to inspire your audience.
Just a few weeks ago, one of the season’s most sought-after designer handbags was sent to your door as a present from its creator, along with a note urging you to include it into your next look of the day (OOTD). You upload a selfie of the bag on your stories right away out of enthusiasm, but did you stop to consider whether or not the handbag is taxable?
No, probably not, and you wouldn’t be the only one. The number of Canadian social media influncers making incomes of all sizes in Canada is growing fast. But in the excitement of content creation and Internet fame, it can be simple to forget that your online actions may have income tax repercussions while under constant, intense pressure to produce new content, gain more followers, and establish your brand.
However, the Canada Revenue Agency (CRA) has begun to target social media influencers who are not upholding their income tax commitments because it is well aware that there may be taxes owed, and they may not be getting what they feel is due.
Influencers on social media have various options for generating cash from their online activities. Social media influencers can have a significant impact on their followers’ purchasing decisions by using their insider knowledge or experience on a particular subject or industry. As a result, businesses have taken notice.
Because of this, social media influencers who have built up a sizable fan base can earn a sizable sum of money from sponsored content, product placements, brand collaborations, and similar opportunities.
Other sources of money for certain influencers on some social media platforms include subscriptions, sponsorships, commissions, direct sales, and referral bonuses. Additional benefits like free merchandise, clothes, trips, or other presents can also be paid benefits.
The CRA would typically regard the money you make using social media platforms as business income, especially if you use social media in an organized and commercial way, according to its website.
Any money you generate from your business operations is therefore taxable and needs to be reported to the CRA. Both monetary and non-monetary income is included in this. The CRA confirms that the same regulations that apply to barter transactions apply if you accept products in exchange for marketing on your social media channel(s) (i.e., non-monetary revenue). As a result, you must include in your taxable income the fair market value cash equivalent of the products you received.
Remembering the social media influencer example from earlier, you would have to include the fair market value of the handbag you received in exchange for promotion in your income for the year it was given to you.
In order to declare your self-employment income on your annual personal income tax return, you must file a Form T2125, Statement of Business or Professional Activities, unless you get compensation from your social media activities through a corporation. You must pay both the employer and employee halves of the Canada Pension Plan (CPP) payments if you are self-employed.
Keep in mind that self-employed people must keep accurate records to substantiate the income listed on their tax filings. So, yes, social media influencers who are making money, and/or receiving goods to promote should probably start working with a tax accountant to stay on the right side of the CRA.
You might be able to offset the money you received from social media activity with qualifying business expenses to lower your taxes. Such costs must have been incurred with the intention of profiting from your social media activity in order to be deducted. Personal expenses and expenses that are not reasonable under the circumstances are not deductible.
The cost of purchasing capital goods like computers, lighting fixtures, or cameras is not immediately deductible. Instead, you might be able to write off their cost as a capital cost allowance over time.
Any deductible expenses would be reported on Form T2125, Statement of Business or Professional Activities, assuming you are a self-employed individual. If the CRA asks to see the supporting documentation for any expenses you claim, you must be able to supply it.
If you are beginning to develop a following on social media, keep in mind that not everyone who follows you is doing so to only like or comment on your material as you work to expand your brand. The CRA is also online, closely monitoring social media influencers to make sure they are adhering to their income tax requirements related to their online activity.
Not all accounting firms and accountants understand enough about social media influencers to be a big help. However, we have made a point of doing so. So, if you are a social media influencer – or streamer or podcaster – and are starting to make money from your efforts, now would be the best time to contact us to find out more about how we can help you.