OnlyFans Taxes in Canada & Other Social Media Revenue: Guidance from a Canadian Tax Lawyer

Introduction – What is OnlyFans?

In 2016, British entrepreneur Timothy Stokely launched a new social media platform, namely, OnlyFans. OnlyFans is a subscription-based website that allows content creators and social media influencers to monetize their content, such as videos and photos. In particular, OnlyFans is where content creators and social media influencers post content that is too provocative or sexual for other social media platforms. They can allow free access to their OnlyFans page, or they can restrict access by locking their content behind a paywall for a monthly fee or a “one-off” tip.

Fans (also referred to as subscribers) who subscribe to an OnlyFans page must be at least 18 years of age and are required to provide valid government identification to sign up. Subscribers who pay a monthly fee or a “one-off” tip:

(1) Gain access to a feed of provocative, often sexual and pornographic content on the content creator’s OnlyFans page,

(2) Can send direct messages to the content creator, and

(3) May “tip” the content creator to receive pictures and videos, created on demand, according to their sexual desires and preference.

Content creators and social medial influencers with an OnlyFans page can increase their fees depending on the subscriber’s requests and demands. Web platforms, including OnlyFans, provide an interactive space between content creators and their fans, making it easier for them to monetize their content.

Typically, the subscription fee for an OnlyFans page ranges between $5 and $20 monthly. Subscription fees and tips are collected by OnlyFans, which pays out 80% (of the fee or tips collected) to the content creator and retains the remaining 20% as its fee. OnlyFans also offers a referral program wherein individuals who refer a content creator can earn 5% of the referred creator’s earnings for the first 12 months on the first $1 million earned by the creator.

According to the New York Times, when OnlyFans was established in 2016, Dannii Harwood was one of ten content creators who gained subscribers. Harwood’s first month of earnings from her OnlyFans page was $257. In 2020, Harwood earned $29,420.47 in August, $34,303.24 in September, $52,693.29 in October and $52,760.49 in November from her OnlyFans page. According to the OnlyFans website, it has over 1 million content creators worldwide, and it pays out over $3 billion annually to its content creators.

OnlyFans provides content creators and social media influencers with a web platform that allows a wide range of options to diversify and optimize earnings. However, the Canada Revenue Agency (CRA) has ongoing concerns associated with content creators not reporting OnlyFans taxable income, as well as revenues from  other web platforms.

Professional Canadian tax lawyers, on the other hand, have concerns surrounding the CRA’s tax audit methods (described below) focused on detecting when content creators are not paying their fair share of OnlyFans taxes in Canada.

Is Money Eaned From OnlyFans Taxable Income?

Canadians are required to report all income earned through their OnlyFans page, other web platforms and all revenue sources to the CRA.

Do You Have to Claim OnlyFans on Taxes in Canada?

If you have unreported OnlyFans taxable income or revenue from other web platforms, consider contacting our certified specialists in our Canadian tax law firm for appropriate guidance on how to legally reduce and pay OnlyFans taxes in Canada to avoid penalties and potential tax evasion prosecution.

How to Claim OnlyFans on Taxes in Canada

As an OnlyFans content creator, if you’re making money, you are generating OnlyFans taxable income and are required to pay the same taxes as other self-employed individuals and Canadian business owners. The good news is that you can also claim relevant business expenses to reduce your OnlyFans taxes payable.

How much OnlyFans tax you pay, when you pay your OnlyFans income tax, and which OnlyFans tax forms you need to submit, among other considerations, all depend on how you are registered with the CRA and how much you make. For example, if you’re set up as a sole proprietorship, you will pay a higher tax rate than if you registered as a corporation. Also, if you earned over $30,000 in OnlyFans revenue, you are required to charge and remit GST/HST.

These are just two fundamental reasons for consulting a tax lawyer for professional tax planning guidance before registering any business with the CRA.

How CRA Auditors Search for Unreported OnlyFans Taxes in Canada

On December 3, 2020, the Canada Revenue Agency (CRA) confirmed that its tax auditors are watching Canada’s social media influencers to determine whether their income from social media is fully reported in their personal income tax filings.

For example, the CRA constantly monitors social media pages and content for clear signs of unreported wealth and/or gifts (such as prize money or assets) and compares what they find with the information content creators report on their tax returns.

According to the National Post, Ted Gallivan, Assistant Commissioner at the Canada Revenue Agency, stated that content uploaded to social media platforms can provide a sense of a person’s revenue and prize money or assets received and can serve as physical evidence that justifies a conversation with the content creator regarding their OnlyFans tax obligations and other social media revenues pursuant to Canada’s tax laws.

According to the CRA, the purpose of keeping a close eye on social media influencers is to identify tax evaders, encourage compliance with Canada’s tax system and collect taxes on unreported income.

The CRA conducted initial research surrounding OnlyFans taxable income and revenues earned by social media influencers and is currently enforcing its plan that encourages online creators to comply with Canada’s income tax system.

CRA’s enforcement plan currently focuses on social media influencers and OnlyFans content creators with earnings above $500,000 annually. At present, the CRA has a dedicated team of 60 specialized tax auditors focused on OnlyFans taxes in Canada and unreported income from internet platforms.

They rely on open-source intelligence to help identify unreported income earned by social media influencers. Open-source intelligence is a multi-method approach whereby the CRA collects, analyzes and makes decisions based on data retrieved from online pages associated with social media influencers, such as their Facebook and Twitter posts.

The CRA explained that its enforcement plan aims to educate social media influencers about their tax obligations pursuant to Canada’s income tax legislation, and then check to see if they respond appropriately.

According to the National Post, Ted Gallivan, Assistant Commissioner at the Canada Revenue Agency, stated that the CRA has successfully concluded 40 internet platform-based tax audits and “reassessed roughly $500,000 in total suspected unpaid taxes. There are another 200 audits currently underway.”

In an effort to increase enforcement of Canada’s tax laws, specifically in the context of social media, the CRA reached out to consulting businesses to ensure that they were aware of the digital tax legislation that came into effect as of July 1, 2021.

The new digital tax legislation requires certain digital platform operators to collect federal sales tax from Canadian consumers.

The CRA calculated that requiring international digital platforms such as Google, Netflix and Airbnb to register for and collect GST/HST from Canadian consumers will raise $1.2 billion dollars over the next five years. The CRA has also announced that in that time, it will have $606 million dollars in new funding to support tax audit programs that target international tax evasion and aggressive tax avoidance.

What is NewNew?

NewNew is another revenue-generating social media platform, and it allows content creators and social media influencers to share videos, create invite-only chat groups and monetize all aspects of their lives.

Content creators invite their fans to private or semi-private groups, and the fans pay to vote on the content creator’s daily activities and choice of activity.

According to the New York Times, NewNew’s founder, Courtne Smith, stated that content creators and social media influencers are joining this platform “for the promise of diversification”.

The Benefits & Concerns Associated with CRA’s Auditors Keeping an Eye on Canada’s Social Media Influencers in Search of OnlyFans Taxable Income and Other Tax Revenues

The CRA has long monitored social media platforms to determine whether taxpayers are posting information and content that are inconsistent with their reported income. As such, keeping an eye on social media influencers in search of tax revenues reflects CRA’s ongoing efforts of ensuring compliance with Canada’s tax system, particularly in the context of e-commerce transactions and social media platforms.

CRA’s enforcement plan also reflects its initiatives at addressing issues pertaining to international tax evasion and aggressive tax avoidance, as well as encouraging transparency and fairness throughout Canada’s tax system.

However, it is not clear how efficient the CRA’s enforcement plan will be at identifying unreported revenue generated through social media platforms such as OnlyFans and NewNew.

As previously mentioned, Canadians are required to report all income earned through their social media accounts and all other web platforms and remit what they owe, including OnlyFans Canada taxes, to the CRA. Failure to do so constitutes tax evasion in Canada.

Subsection 238(1) of the Income Tax Act provides that a person who has failed to file a tax return is guilty of an offence and, in addition to any other provided penalties, on summary conviction of tax evasion faces (a) fines ranging between $1,000 and $25,000, or (b) both the fine described in paragraph (a) and imprisonment not exceeding 12 months.

Additionally, paragraph 239(1)(b) of the Income Tax Act provides that a person who evades payment of a tax imposed by the Act is liable on summary conviction to (a) a fine ranging between 50% to 200% of the amount of the tax that was sought to be evaded, or (b) both the fine described in paragraph (a) as well as up to two years imprisonment.

Further, subsection 327(1) of the Excise Tax Act provides that on summary conviction of tax evasion, fines can range between 50% to 200% of the amount of the tax that was sought to be evaded, as well as up to two years imprisonment.

Moreover, subsection 327(2) grants the Canadian tax litigator carrying out the prosecution for the CRA discretionary powers to proceed by way of indictment, in which case fines range between 100% and 200% of the amount of tax that was sought to be evaded plus up to five years imprisonment.

Focusing on social media influencers with income above $500,000 does not address the ongoing non-compliance issues of Canada’s tax laws, so there is little doubt that now that there are systems in place to mine social media data and compare it to income, prizes and assets reported on tax returns, the CRA will take a more broadly-based tax audit approach and target lower unreported income amounts.

While social media platforms like OnlyFans are forcing the CRA to find new innovative methods to conduct its income tax audit and verification techniques, its scrutiny of social media pages raises privacy and ethical concerns, such as whether CRA agents have the legal authority to investigate OnlyFans and NewNew pages without preliminary evidence of the content creator’s wrongdoing.

Also, the invite-only feature on NewNew could potentially limit the CRA’s attempts to investigate NewNew pages, which begs the question of whether its efforts are enough to ensure compliance with Canada’s tax laws and tackle issues of tax avoidance or evasion within the realm of a booming digital market.

Pro Tax Tips – OnlyFans Taxes in Canada, Tax Guidance and the CRA’s Search for Unreported Tax Revenues

If you have questions concerning CRA tax audits, have unreported OnlyFans taxable income or other social media-related revenue, or if you are an OnlyFans and/or a NewNew content creator or a social media influencer undergoing a CRA tax audit, contact one of our top Canadian tax lawyers for tax guidance. You may qualify for relief through the CRA’s voluntary disclosures program (VDP).

Voluntary disclosures, also known as tax amnesty, is a complex area of law that requires detailed analysis and advice from an experienced Canadian tax lawyer.

The purpose of the VDP is the avoidance of “tax evasion and aggressive tax avoidance” to ensure a tax system that is responsive and fair for all Canadians. Canada’s Voluntary Disclosures Program promotes compliance with the law and allows taxpayers the opportunity to voluntarily (1) correct inaccurate or incomplete information; and/or (2) disclose to the CRA information which was not previously reported.

In the context of OnlyFans taxes in Canada, taxpayers who have unreported income earned through social media or content creation may be eligible for penalty relief and partial interest relief under Canada’s Voluntary Disclosures Program. A valid Voluntary Disclosures Program application must:

• Be “voluntary”;
• Be “complete”;
• Include payment of the estimated taxes owing. A taxpayer who is not capable of making such payment at the time of the application may request consideration for a “payment arrangement”;
• Include information pertaining to income tax that is at least one year past due;
• Include information pertaining to GST/HST for at least one reporting period that is past due.

To qualify for relief under the Voluntary Disclosures Program, the taxpayer must submit a complete application to the program and meet its above-mentioned requirements.

If you have unreported OnlyFans taxable income or need tax planning to reduce your tax burden, contact our tax law office for guidance from one of our top Canadian tax lawyers.