In today’s social and digital marketing age where influencers, KOL and affiliates drive significant volumes of sales and have therefore become an integral part of a company’s marketing strategy, tax compliance and reporting for engaging companies becomes ever more complex. While social and digital marketing has evolved, the operation and engagement models of influencers, KOL and affiliates often has not. Most influencers, KOL and affiliates are not stars born over night and rather build a reputation and following with hard work and dedication in time. Typically starting out as individuals, the initial structure of sole proprietors remains even with growing success and fee earnings.
You might ask why or how could this affect you. When a company engages the services of local persons who are not its own employees, such as consultants and freelancers, including social and digital marketing persons, the company has additional tax reporting obligations concerning payments to those persons. Specifically, a company has to report payments made to a person exceeding a total of HKD25,000 per fiscal year by filing form IR56M and a control list IR6036B together with the Employer’s Tax return to the IRD. It will generally, unless the payment is made to non-resident entertainers and sportsmen for performances in Hong Kong, not be required to withhold any payment for tax purposes to local influencers, KOL and affiliates. Non-compliance falls within the general scope of the punitive penalties under the Inland Revenue Ordinance.
If you need help with your tax compliance, our payroll and accounting specialists are available to assist. Contact us.