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Tax Obligations for Canadians in the Platform Economy

Tax Obligations for Canadians in the Platform Economy (Twitch, Youtube, Instagram, and OnlyFans)

We live in an age of constant change, disruption, and innovation. When it comes to business, the internet has changed everything and regulations have amplified the move to new platforms beyond anything we’ve previously seen. This isn’t really news of course, but what does continue to surprise a lot of people is that just because you make money using new platforms and tools doesn’t mean that you are free from tax obligations. And perhaps more importantly, just because your revenue comes from new platforms it doesn’t mean that the Canada Revenue Agency (CRA) isn’t watching. 

In fact, there have been a number of recent moves that suggest the CRA is paying close attention and will no doubt continue to take these revenue sources seriously into the future. As of July 1, 2021, new GST/HST obligations apply to digital businesses and digital platform operators.  On December 17, 2021 the CRA released their Underground Economy Business Plan 2021-2022 which focuses heavily on digital models and platform economy transactions. And on February 1, of this year (2022), the CRA released a series of compliance guidelines aimed at helping sellers and service providers within the platform economy understand their obligations. All of this makes ensuring compliance important for anyone earning revenue from these sources who doesn’t want to face the risk of severe penalties. 

But we hear from clients all the time that figuring out exactly what their obligations are can be tricky. So, we’re putting together a series of blog posts designed to unpack taxpayer obligations in the age of the platform economy. Today’s post will take a closer look at the obligations for social media influencers and content creators on platforms such as Twitch, YouTube, OnlyFans, and Instagram. Stay tuned for future posts on the sharing economy, gig economy and peer to peer (P2P) market places.

What Social Media Influencers & Content Creators Need to Know

Whether you’re a gamer earning revenue through streaming on Twitch or YouTube; a performer receiving gifts and donations through OnlyFans; or an influencer earning commissions, sponsorship, and perks through Instagram or TikTok; the CRA expects you to report earnings and pay taxes. This includes both monetary and non-monetary earnings such as products, clothes, trips, or other gifts. 

It’s also possible that the CRA may go after you for unreported income that you’ve gained from these platforms in past years. Depending on the amount earned, this can result in significant penalties, interest and even jail time. The good news in such cases is that it may be possible to avoid or reduce penalties through the CRA’s Voluntary Disclosure Program. If you have questions about this or any other tax related issue, give us a call. We’re happy to help.

The bottom line is if the CRA believes you are carrying on a business through social media or other platforms you must report all income, including fair market value for non-monetary items. CRA’s definition of a business is pretty broad “The CRA will generally consider your social media activities to be business activities where there is an element of profit to your activities.”1  And remember, profit doesn’t just mean money. Continue reading to find out more about your obligations, how to get money back by tracking expenses, and possible GST/HST implications.

 What are my obligations?

If you receive earnings (both monetary and non-monetary) from your participation in the platform economy then you are required to pay taxes. Income made through such channels and platforms includes but is not limited to:

  • Subscriptions
  • Advertising
  • Sponsorships
  • Calls to action
  • Sales or commissions
  • Referral codes
  • Barter transactions
  • Perks or other gifts 
  • And tips

As an influencer or content creator you will most likely be considered self-employed (rather than an employee) which means that your tax obligations may be different than you are used if you’ve worked as an employee in the past. 

You are required to:

  • Report your earnings on either your personal income tax return or your corporation tax return. It is important to keep in mind that as a self-employed induvial, tax is not withheld from your earnings, so it is a good idea to hold a portion of your earnings back in order to pay taxes, CPP, and GST/HST (see below) come tax time. The amount to set aside will depend on your income level so it is important to contact your accountant to help you determine your total tax obligations.  It’s also important to note that (depending on your tax threshold) that you may be required to pay future income taxes by instalments at regular intervals, rather than as one lump sum during tax season. The typical threshold for this is more than $3,000 net tax owing for most of Canada and $1,800 for Quebec residents.  
  • Contribute to the Canada Pension Plan (CPP). Every person who works in Canada  who is over 18 and earns more than $3,500/year must contribute to CPP (with a few exceptions including Quebec residents). In addition, since you will be considered self-employed, you will be required to pay both the employer and employee portions, using the Schedule 8, CPP Contributions on Self-Employment form.
  • Keep records of all transactions, earnings, and expenses.  

Do I really need to keep records & track my expenses?

The simple answer is yes. You are required by law to keep business records to be able to support your income and expense claims regardless of the particular business or platform on which it is run. The good news is that by properly tracking your expenses, you may be able to claim a significant portion as deductible when you file your taxes. In order to do so, you must keep records of:

  • All earnings
  • Details about when and how you earned your income
  • Details of the expense incurred and how it relates to your business. For example, you may be able to claim a percentage of money spent on computer equipment, internet provider fees, platform fees and even rent.

While this may seem daunting there are several apps and services that exist to make this whole process as simple and painless as possible. We recommend Dext for all of our clients. It integrates easily with QuickBooks Online and streamlines all aspects of expense management while handling many backend accounting tasks automatically. If you’re looking for advice on what to choose or how to get setup, give us a call. We’re happy to chat about this or any other tax solution that can help you save time and money.

What about GST & HST?

You are required to register for General Sales Tax and Harmonized Sales Tax (GST/HST) if your taxable supplies exceed $30,000. Changes to Canadian law that took place on July 1, 2021 now include those who conduct business through platforms such as YouTube and OnlyFans under these requirements.4 Unfortunately, as a social media influencer or content creator, it can be complicated to figure out if you are required to register for, collect, or pay GST/HST on taxable supplies generated through social media channels.3 In many cases whether your platform earnings are subject to GST/HST, requires a ruling by the CRA done on a per taxpayer basis. If it is determined that you need to register, you will be given a GST/HST # after registration, and you will need to start charging taxes. But to further complicate matters, some sites (such as OnlyFans) do not (as of the time of writing) allow you to input your GST/HST #. Which means you may be required to remit (pay) GST/HST to the CRA after the fact. If you find all of this confusing, you are not alone. Hopefully, the CRA will work on simplifying these requirements in the future. In the meantime, an experienced tax professional can submit a ruling request on your behalf and help you understand your obligations.    

If you’re a social media influencer or content creator trying to figure out exactly what your tax obligations are, the tax experts at CPA Plus are here to help. Give us a call anytime. We’d be happy to chat with you about this and any other tax related decision you or your business is facing. Stay tuned for future posts on compliance in the platform economy including our take on the sharing economy, gig economy and peer to peer (P2P) market places.

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Employee Home Purchase Loan – What You Need To Know

What Business Owners Need to Know

Drawing and retaining quality talent is arguably more important to the success of your business than any other factor. This is especially true in today’s highly mobile and competitive labour market. The ability to work from anywhere coupled with widespread changes in employee expectations mean that many of the best employees know that they are in the driver’s seat. This leaves employers looking for unique ways to differentiate their offerings in order to attract and keep top talent. 

One (often overlooked) incentive that can set you apart is the option for corporations to offer employees low-interest-rate, home purchase loans as part of their incentive packages. Finding a home in today’s high-priced real estate market is increasingly difficult. This makes home purchase loans highly attractive to potential employees, especially if you’re courting talent from out of town or overseas. And helping employees and their families become established in the community is a great way to guard against turnover.

However, there are strict regulations and guidelines, established by the Canadian Revenue Agency (CRA) as part of the Income Tax Act . These regulations must be followed when setting up such arrangements in order to remain compliant and avoid trouble down the road for you and your employees. If you would like help setting up an arrangement such as this, please feel free to give us a call. We’d be happy to walk you through it.

Benefits and restrictions

  • Allows corporations to attract and retain top quality talent
  • Allows potential employees to obtain more favorable terms than are often available through traditional lending institutions
  • Must follow all rules and statutory regulations as they apply to both individuals and corporations under Subsection 15(2.4) of the Income Tax Act, including proper documentation.

Conditions and exemptions

It is possible for shareholder-employees to extract funds from their corporation, incentivizing shareholders for investing in the corporation. However, the standard regulations state that the loan or debt will be included in the income of that person or partnership for the taxation year in which the loan was made. In order for employee home purchase loans to be considered exempt from the above regulation it is important that the following conditions are met:

  1. The home purchase loan must be made as a result of the recipient’s employment.
  2. At the time the loan is made bona fide arrangements have to be established to allow for repayment of the loan within a reasonable time.

Trying to decide if Home Purchase Loans are the right fit for you?

The rules and regulations can be difficult to parse and making a mistake can be costly for you and your employees. That’s why the tax experts at CPA Plus are here to help. Give us a call anytime and we’d be happy to chat with you about this and any other options you are considering including in your incentive program.

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