UAE influencers must pay tax and register with government or risk 5 years in prison

Influencers need to pay tax and register with the authorities or face potential jail time

All UAE-based influencers are required to register with the Federal Tax Authority even if they are not liable to pay the 9 percent corporate tax.

The UAE’s Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses introduced the country’s first federal corporate tax regime which went into effect on June 1, 2023. All influencers earning AED375,000 or more per year from influencing activities must pay 9 percent corporate tax, but all are required to register with the Federal Tax Authority.

The new requirements place new administrative responsibilities on their businesses.

“Given that all influencers operating with the aim of generating profits in the UAE fall under the purview of the Corporate Tax Law, it is mandatory for every influencer to register with the Federal Tax Authority (FTA) and report their earnings,” Maroun Abou Harb, associate at BSA Legal, told Arabian Business.

“This requirement applies even when influencers are not paying taxes,” he emphasised.

This means that all influencers must register to obtain a Corporate Tax Registration Number (CTRN) which can be done on the EMARATAX platform and accessible on the tax authority’s website.

Influencers: Consider hiring an accountant

Influencers are treated as businesses for tax purposes as they operate entrepreneurially by marketing products or services to their audiences. Through sponsored posts, brand deals and ads, they earn revenue while also creating content, negotiating contracts, and handling finances – like a business.

All influencers, even those exempt from paying tax, are now obligated to file a Tax Return for each tax period, including all relevant supporting documentation within nine months from the end of the relevant tax period, Abou Harb explained.

If their finances are straightforward, influencers can manage tax filing themselves, he said, but advised that hiring an accountant is preferable, especially for those filing returns for the first time.

“The complexity of tax regulations and the potential nuances in the influencer’s financial situation may make it advisable to seek the expertise of an accountant.”

Though not a requirement, hiring an accountant would ensure things are done the right way as they have the knowledge and experience to navigate through tax laws and ensure influencers’ finances accurately report their earnings and comply with all relevant regulations.

While it is not a strict requirement to hire an accountant, it is advisable given their knowledge and experience to navigate through tax laws, ensuring that earnings are accurately reported and comply with all relevant regulations.

Tax evasion could risk up to 5 years imprisonment

The UAE tax authorities actively detect tax evasion by examining factors like non-issuance of invoices, false input tax credits, improper exemptions, and falsification of exports.

In the context of influencers, tax evasion may involve not reporting or under-reporting income earned through sponsored posts, brand endorsements, affiliate marketing, undisclosed product placements, and non-payment of taxes on freebies.

Those convicted of tax evasion can face a prison sentence of up to five years and a fine of up to three times the amount of tax evaded, said Abou Harb. Equally, businesses can also face hefty fines for tax evasion.

“In addition to the criminal penalties, tax evaders may also be subject to civil penalties, such as interest and penalties on the unpaid tax. It is important for individuals to be aware of the penalties for tax evasion and to take steps to comply with all tax laws. The FTA and Ministry of Finance have a number of resources available to help them comply with tax laws,” Abou Harb said.

Though taxing influencers is “a complex issue,” he believes that taxation policies must have the flexibility to adapt to the rapidly changing and growing social media influencer industry to ensure continued relevance and effectiveness in addressing the challenges posed by influencer marketing.

Adhering to rules: UAE Corporate Tax penalties

Liable businesses or individuals must follow corporate tax rules carefully to avoid fines in the UAE.

Late or missing registration, deregistration, tax returns, declarations, and payments can incur penalties. In addition, not keeping proper records, repeat offenses, submitting incorrect returns can result in fines.

Those who fail to assist auditors or provide Arabic documents to authorities when requested also face penalties.