How are social media influencers taxed abroad?
As social media continues to grow in popularity, influencer marketing has become a new tool for reaching out to consumers. Brands are now using social media influencers to advertise their products and reach out to a wider audience and gain more followers.
These social media influencers are individuals who have gained a large number of followers on different social media platforms for one reason or another.
Brands may reach out to you as an influencer and offer you monetary compensation or free products in exchange for posting photos or videos that feature and promote their product.
However, as you earn money from your sponsorships, endorsements, and other social media income, your earnings are subject to income tax.
If you’re thinking about taking up this career path and becoming a social media influencer or you’re already one, then it is important for you to understand how your taxes will be affected by being one. Read on to learn more.
Is your income tax paid domestically or abroad?
The answer to this question depends on the country in which the you live. Each country has different tax laws, so it's important to research the tax code of the country in question (or speak to a specialist tax accountant like Capture that can help).
If you're an influencer who is paid sponsorships, endorsements, and other social media income deals, it's important for you to know where you are liable to pay tax. Because depending on your location, you may be subject to pay tax in the country you're spending most time in.
Sometimes if you're paid from overseas, tax is deducted at source. You might be able to reclaim this if you're not a resident of that country - it all depends on complicated things like double tax treaties between countries. There are a few things to keep in mind if you're an influencer who receives their income from abroad.
For example, if you live in the United States, you are required by the income tax act to pay income tax to the IRS (Internal Revenue Service). However, if you live outside of the US, you may or may not be required to pay taxes to your home country, depending on that country's tax laws.
This is why it’s important to know the tax laws of both your home country and the country you reside in so that you can ensure you are complying with all the necessary regulations.
Failure to do so could result in penalties, including, interests, fines or even imprisonment. If you're not sure whether your income tax is paid domestically or abroad, be sure to speak with a tax professional.
What tax implications are there?
The tax implications that exist for social media influencers will depend on the country in which they reside and the country from which they’re paid. This is why I said that it is important to be aware of the tax laws in both your home country and the country in which payment is made so that you can comply with both sets of tax laws.
Let me give examples of some tax implications so that you will best understand what I mean:
For example, if an influencer earns income from sponsorships and endorsements while living in Dubai, the income may be subject to income tax in Dubai. However, if the influencer moves to Bali and continues to earn income from the same sponsorships and endorsements, the income may be subject to income tax in Bali.
If you're a US citizen and you're paid by a sponsor in Dubai for a post on your Instagram account, you may be subject to income tax in both the US and Dubai. Similarly, if you're paid by a sponsor in Bali for a post on your blog, you may be subject to income tax in both your home country and Bali.
It all depends on where you are deemed to be 'resident' for tax purposes and sometimes that can be in two countries at the same time. In that case we need to refer to the double taxation treaty that may exist between the two countries to see who gets 'taxing rights' on you. Who said tax was easy!
Case Study: Mike Thurston
Mike came to us looking for a way to reduce his taxes. We talked about moving to Dubai which he was already thinking about and how that would help him to reduce the tax he paid on his income.
Given that he can run his business from anywhere and most of his income came from outside the UK, it made sense for him to relocate to a zero-income tax jurisdiction.
We helped him with the entire process from introducing him to our partners to setting up a free zone company to structuring the income flows and carrying out the necessary procedures in his UK tax filings to make sure that he is treated as a non-UK resident for UK tax purposes. Mike now enjoys tax-free income in Dubai saving him £000's!!
To learn more about
our clients and what they say about us check out our testimonials!
Tax laws abroad
Different countries have different tax laws when it comes to taxing social media influencers. I will give some examples of countries and their tax laws.
Dubai
Dubai is currently an income tax free jurisdiction - no one pays income tax on their earnings. However they have recently announced that companies will start to pay corporation tax at a rate of 9% albeit there may be some exemptions available.
That said, it is still highly advantageous compared to the UK where overall taxes can be over 50% when you take into account both corporation tax and income tax together.
Bali
While the Indonesian government does not currently have any specific tax laws in place for social media influencers, that doesn't mean they don't have to pay taxes at all. In terms of paying taxes in Bali, social media influencers will need to file a tax return with the Indonesian government regardless of their employment status.
This return will need to include all income earned from activities in Bali, such as sponsorships, product endorsements, and other forms of compensation. The tax rate in Indonesia is relatively low, at only 5% personal income tax for most income earned. The government have recently introduced special treatment for 'digital nomads' to encourage people to locate to and work out of Bali and offered favourable tax treatment as an enticement.
United States
Influencers are taxed in the US based on their location. If they live in a state with high-income taxes, they will likely have to pay more taxes than someone who lives in a state with lower taxes. This is because income from social media influencers is considered taxable income.
Canada
If you are a Canadian citizen and live in Canada, you are required to pay taxes to the Canadian government. But if you are a Canadian citizen and live in the United States, you are only required to pay taxes to the IRS.
Australia
Influencers are only to pay tax on their Australian-sourced income. This means that if an influencer has followers in other countries, they will not be taxed on that income.
Other countries include:
United Kingdom
Social media influencers are taxed based on their residency status. This means that if an influencer is a resident of the UK, they will be taxed on their worldwide income.
However, if an influencer is a non-resident, they will only be taxed on their income from sources within the UK. There are a few countries that have special rules for social media influencers.
Conclusion
As an influencer, it's important to be aware of the tax implications of your earnings. Depending on where you live, you may be subject to different tax laws. And this can have a significant impact on your earnings as a social media influencer.
If you're fed up of paying sky high UK taxes and thinking of relocating abroad anyway and would like to see where and how best to do so to keep more of what you earn, you can
book a call with a specialist at Capture accounting here.
Book a call
Apply for a call with Capture Accounting or request a more information below.
Request a Callback
Meet Reza
Reza is the Founder of Capture Accounting and also a content creator himself. He spends most of his time coaching and mentoring other accounting firm owners to build more profitable firms and do better for clients. You'll find him very active on LinkedIn.
