The Bureau of Internal Revenue (BIR) has released Revenue Memorandum Circular 97-2021 to clarify the tax obligations of all social media influencers, individuals or corporations, with the end goal of raising revenues from their undeclared income and at the same time, reminding them of the possible consequences of their failure to pay taxes. This comes on the heels of reports that the BIR has been receiving stating that certain social media influencers are not paying their income taxes despite earning huge income from different social media platforms.
“Social media influencers” include all taxpayers, both individuals and corporations, receiving income, in cash or kind, from social media sites and platforms in exchange for services performed as bloggers, video bloggers, or as influencers, in general, and from any other activities performed on such social media channels. These influencers are liable to pay income tax and business tax (either percentage or value-added tax) unless exempted under the Tax Code, as amended, and other existing laws.
The BIR classifies social media influencers, other than corporations and partnerships, as self-employed or persons engaged in trade or business as sole proprietors. Thus, their income is generally considered as business income. They derive their income from:
a) YouTube partner programs,
b) sponsored social and blog posts,
c) display advertising,
d) becoming a brand representative/ambassador,
e) affiliate marketing,
f) co-creating product lines,
g) promoting own products,
h) digital courses, subscriptions, e-books and
i) podcasts and webinars.
To constitute gains or profits, the payments received by a social media influencer must be in consideration for services rendered or to be rendered, irrespective of the manner or form of payment. As such, if the influencers receive free products in exchange for promotion, they must declare the fair value of such products as income. In addition, income treated as royalties originating from another country shall likewise be included in the computation of the gross income. An example of such royalties are payments from YouTube, through any other agreement between the content creator and YouTube, received starting June 1, 2021.
For YouTubers, common business expenses include, but are not limited to, (1) filming expenses, (2) computer equipment, (3) subscription and software expenses, (4) internet and communication expenses, (5) home office expenses, (6) office supplies, (7) business expenses, (9) depreciation expenses, (10) bank charges and (11) shipping.
Social media influencers must secure their Taxpayer Identification Number from the Revenue District Office having jurisdiction over the place where their head office is located, or over their place of residence. Those required to pay internal revenue taxes must keep books of accounts duly registered with the BIR, which shall be audited yearly by an independent Certified Public Accountant if applicable. They are also required to withhold creditable tax, expanded withholding tax, final tax on compensation of employees, and other withholding tax if applicable.
Social media influencers who willfully attempt to evade payment of taxes, to make tax returns, to supply accurate information, or to pay tax shall be held criminally liable, in addition to payment of taxes and penalties.
To avoid the risks of double taxation, social media influencers receiving income from nonresident persons from countries where the Philippines has a tax treaty must inform such nonresidents that they are residents of the Philippines and to comply with requisites to claim treaty benefits.
P&A Grant Thornton
Certified Public Accountants