Question $5($Marks: $20)$

The following is an excerpt from a media release issued by the South African Revenue Services on

$3$ April $2023$:

$$The South African Revenue Service $($SARS$)$ is pleased to announce its preliminary revenue collection

results for the $2022/2023$ financial year, which reflects a significant growth trajectory over the past

few years......$$

$$The $2023$ financial year end results are an important indicator of SARS$$ commitment to

implementing its legal mandate of collecting all revenue due, promoting a culture of compliance and

facilitating legitimate trade......$$

$$As we start the new financial year, SARS will continue to explore all avenues of revenue collection.

The ever$-$evolving world of work is presenting new opportunities. This changed environment was

never anticipated when we designed products to respond to the challenges in the economy.

Naturally, the enabling legislative framework will be amended to keep pace with this new

environment. We are therefore, among others, refining our tools to cater for the Gig economy and

other areas of the digital economy, including looking at the role of media influencers.$$

Scenario:

Sam Brown and Jerry Black are fitness and wellness influencers with a significant online presence.

They have amassed a substantial following on TikTok, YouTube, and their personal blog, where they

share workout routines, healthy recipes, and lifestyle tips. Throughout the year they earned

commissions through affiliate marketing for fitness$-$related products. They collaborated with various

fitness brands for sponsored posts, featured products in their videos and blog posts.

Sam and Jerry sometimes opt for a barter arrangement, exchanging their services for high$-$end

fitness equipment, equivalent in value to their usual sponsored post compensation.

However, the primary source of their income comes from a single fitness company, "FitLife $($Pty$)$ Ltd$,"$

with whom they have an exclusive long$-$term sponsorship deal. More than $80\%$ of their total

earnings for the year are derived from this contract with FitLife.

They have decided to formalise their business arrangements and establish themselves as a

professional entity. Initially they will employ a social media manager and a bookkeeper.

They are unsure of whether they should operate their business as a company or a partnership, and

they want to ensure they are compliant with all relevant tax laws and regulations.

Required:

Q$\mathrm{.}5\mathrm{.}1$ Discuss the gross income implications of the barter transactions for Sam Brown

and Jerry Black.

Discuss the possibility of Sam and Jerry$$s company being a personal service

provider, with reference to the definition of a personal service provider.

$(5)$

Q$\mathrm{.}5\mathrm{.}3$ If Sam and Jerry$$s company meets the definition of a personal service provider,

what tax obligation does FitLife $($Pty$)$ Ltd have?

$(2)$

Q$\mathrm{.}5\mathrm{.}4$ List two $(2)$ measures that SARS could implement to encourage social media

influencers to accurately report their income and expenses.

$(4)$

Q$\mathrm{.}5\mathrm{.}5$ If Sam and Jerry registered their business as a partnership, would they qualify for

the primary tax rebate applicable to individuals? Motivate your answer.

$(3)$

Q$\mathrm{.}5\mathrm{.}6$ Briefly explain the purpose of the primary tax rebate. $(2)$

$[$TOT