What must freelancers know about the legal implications of working in a gig?
In Singapore, it’s common to see entrepreneurs running a side-business on top of their priority job or experienced professional working as a self-employed. However, in both scenarios, those side gigs are fully taxable. Without proper knowledge of the business taxation system, freelancers may be liable for any legal action involving their business and can be charged for tax evasion.
We have prepared a checklist and guide for you to determine your company’s eligibility for taxes, and for you to file your company’s taxes accurately.
- Have you derived any income from your business activities?
- Have you received a Tax Form/Invitation to E-file from IRAS?
- Do you earn more than S$20,000 (by 31 December 2018)?
If you meet the above checklist, then you are obligated to file your tax.
Basic guide to filing your tax:
- Determine your tax obligation
- Decide on the accounting period (12-month period)
- Keep proper records and accounts (Invoices, receipts, vouchers and other documents)
- Prepare Statement of Accounts (Profit and Loss Accounts and Balance Sheet)
- Prepare a 4-liners statement ( Revenue, Gross Profit, Allowable Business Expenses and Adjusted Profit)
- File income tax to IRAs through e-filing/form
- Medisave as it is a requirement for all Singaporean Self-Employed Personnel / Freelancers
What is the difference between being self-employed and a freelancer in Singapore?
Freelancing is categorized as a form of self-employment as defined by the Inland Revenue Authority of Singapore (IRAS). Freelancers provide service in return for monetary compensation and are another form of self-employment that includes commission-based agency work. Yet, according to the Ministry of Manpower, freelancers are defined as own-account workers who operate a business or trade without employing any paid workers, and these workers make up more than 50% of the total self-employed population.
Here are some legal tips for Singapore Influencers and Blogger:
It is mandatory for you to file personal tax returns for the income you have earned from social media. Any omissions or understating of income done negligently or without reasonable excuse can result in a penalty amounting to double the tax undercharged with fine up to $5,000 and/or imprisonment of up to 3 years. In another scenario whereby tax evasion, when there’s an intention to make a false statement, you will have to face several consequences. The penalty can be triple the tax undercharged with a fine of up to $10,000 and/or imprisonment of up to 3 years.
According to IRAS Essential Tax Information for Social Media Influencers, if your blogging-related activities have generated an annual net business income of more than $6,000, it has to be declared as self-employed income. Entrepreneurs that are self-employed will need to file any income earned as business income, and not salary. This will be taxable as part of total personal income, at the individual income tax rates.
However, many people have been misled by the term of blogging as posting articles on a website or blog site. To clear the doubt, any activities related to social media platforms like Instagram, Facebook, Youtube, Twitter, or placing of banner advertising is considered as social media blogging. If you have received compensation in the form of cash and goods (monetary and/or non-monetary) benefits-in-kind, there is a chance that it is taxable regardless of it being a part-time hobby or full-time job or contract between the payer and recipient.
In short, products/services received as a recurring supply or provided over a period of time will need to be declared. For products/services received on an ad-hoc basis for one-time consumption, they will need to be declared if it worth more than $100 at market price. Social media influencers or bloggers are highly advised to check up on the current guidelines stated by the government to ensure that they are not flouting any rules.