Frank Sebatana | Senior Legal Tax Consultant, PKF Durban

Recently the South African Revenue Service (SARS) made announcements through its media statement “SARS clarifies issues around social influencers” that it is aiming to focus on the taxation of influencers (for the purpose of this article “digital entrepreneur”).

Like a “TIK-TOK” post, this article will “Make Your Day” by giving you clear and short advice. As a digital entrepreneur taxation might not be your “vibe” - it’s complex and even harder to understand in an emerging economic sector that is not regulated like a traditional 9 to 5 job. Unlike in a typical employment set up, where bosses report their employees’ income (salary) and pay the relevant taxes over to SARS, the duty to register for Income Tax and Provisional Tax falls on you. As a digital entrepreneur, you must disclose your income and pay Provisional Tax directly to SARS.  

The Impact of SARS Media Statement

A provisional taxpayer earns income (other than a salary or traditional remuneration), that is not limited to cash received. It includes “in kind” payments or benefits such as sponsored products, use of a car, cellphones, luxury goods (e.g. handbags or purses) and travel perks e.g. flights, accommodation for personal holidays. According to section 1 of the Income Tax Act 58 of 1962, all such payments or benefits constitute taxable income.  

Provisional Tax is paid twice a year (every six months). Payments must be made on the last business day of the month – before a Saturday, Sunday or public holiday:  

• First payment is due on or before 31 August, six months after the beginning of the tax year.
• Second payment is due on or before 28/29 February, the last day of the tax year.
• If necessary, a voluntary third (“top-up”) payment can be made to avoid interest. 

If a provisional tax estimate is not submitted within four months of the due date, SARS deems that the provisional taxpayer submitted a R0 (zero) estimate, which may result in a penalty. Non-compliant provisional taxpayers will have to pay (unpleasantly expensive) penalties and interest:

• Late Payment Penalty - a 10% penalty is imposed on any amount you leave unpaid by the due dates mentioned above (for either the first or second payment); and
• Underestimation Penalty - a further penalty may be imposed for underestimating your taxable income in the second estimate or failing to submit an estimate altogether.  

If you are a digital entrepreneur, you may also have to register for Value Added Tax (VAT) within 21 business days from the date your turnover (“sales”) exceeds R1 million in any consecutive 12-month period. Late payment of VAT may also attract penalties and interest.

SARS has advanced technology (whilst demanding banks to report their clients banking activities) making it easier to identify digital entrepreneurs who should be registered for Income Tax and Provisional Tax.  

Save Me, I Did Not Know - Voluntary Disclosure Programme (VDP)

Drowning in tax debt isn’t fun or funny (“it can make a grown man cry”), your lifeline is a Voluntary Disclosure Programme “VDP” application. The conversation moves offline and takes a serious problem-solving approach.

If you come forward voluntarily (if you submitted a tax return) to disclose previously undeclared income and correct other tax defaults (by registering for Income Tax or Provisional Tax), SARS may, through the legal and confidential VDP process, waive penalties related to the non-compliance and reduce interest on the unpaid tax. This also provides you protection from Criminal Prosecution related to the disclosed defaults. In essence, you are given a clean slate to avoid facing the full wrath of SARS enforcement action.

Tax compliance isn’t just a legal obligation; it’s a civic duty. SARS is ready to help, and so is PKF. Are you ready to disclose?

Conclusion

Based on the above, it is strongly recommended that individuals who are digital entrepreneurs seek professional tax advice. This will help determine whether you qualify as a provisional taxpayer, whether your taxable income has been correctly disclosed, and whether the relevant taxes have been paid over to SARS. If not, you may need to consider applying for relief through the VDP, if this option is available based on the type of non-compliance and whether you meet the VDP criteria.