Bloggers now to pay tax for "free" goods and services

Inland Revenue Authority of Singapore (IRAS) has turned its attention to the local blogging community this tax season.

For the first time, the largely unregulated community has received letters from the IRAS stating that all payments and benefits derived from the carrying on of blogging or any other marketing activities performed on social media platforms “constitute gains or profits from a trade or a business under section 10(1)(a) of the Income Tax Act (ITA)”.

“Any benefits whether monetary or in-kind provided to your family and friends will be taxable in your name,” said the note from IRAS.

The rule applies to not only blogging website but social media sites such as Facebook, Instagram, Twitter and the likes. Payments are taxable regardless whether they are received directly from the advertisers, or indirectly through a social media influencer companies.

Ryan Lim, founder of QED consulting lauded the IRAS for taking the step saying that this is a valid move in professionalising a largely un-regulated space. Top-tier bloggers can easily earn up to five figure sums for engagement.

“Ignorance is no longer bliss for the blogging community. The industry needs to be proffesionalised as athletes and celebrities have already long been regulated,” he said. Lim added that for the greater marketing community, this would mean companies are forced to understand the legal liabilities and implications of these commercial transactions.

Meanwhile Althea Lim, CMO at social influencer agency Gushcloud also told Marketing that the company had hoped that IRAS could have engaged with key players in the influencer marketing industry to craft the guidelines together. With regard to the current guideline, Lim added that it needed to be better scoped to provide more clarity to industry members.

Lim also stated the market value of the product or service should not be the taxable amount. What would be more accurate and less subjective is the market value of the service the influencer provides in exchange for the in-kind payment, should they accept it. This creates a simpler reference point - an Influencer's rate card or past rates.

"The influencer industry is young and a growing one. Many of these influencers are in their 20s, and being an influencer has somewhat evolved to being a paying hobbyist job.We believe that income earned by any profession should be taxable, but when it comes to the influencer marketing industry, a deeper conversation needs to happen between industry players and IRAS to avoid misunderstanding and miscommunication," she added.

Last year Gushcloud also worked with ASAS to create a digital and social media advertising guideline. The guidelines urged for marketers are to make sponsored messages distinguishable from personal opinions and editorial content in their posts.

In a statement to Marketing, prof Tan Sze Wee, chairman of ASAS also said:

"While ASAS will not comment on income tax return compliance, we wish to remind marketers, bloggers and members of the public that, in keeping with the principle of truthful presentation, the Singapore Code of Advertising Practice will require a distinction between sponsored messages, personal opinions and editorial content in their blog and social media posts and the disclosure of any commercial relationships."

(Read also: Should paid content on social media be marked more clearly?)