Taxation of social media influencers
In no uncertain terms, the Bureau of Internal Revenue’s memorandum circular states that social media influencers are liable to be taxed
Published in Daily Tribune on September 3, 2021
by: Vanessa Arrha A De Leon
Just last month, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) 97-2021 on the taxation of any income received by social media influencers. As a result, questions have surfaced from both established and starting influencers as to the applicability of the said issuance to them. A popular vlogger couple was even suspected of closing down their YouTube channel as a direct result of the issuance.
In the said RMC, the BIR not only clarified the tax obligations of the so-called social media influencers on income received by them from social media sites and platforms, but also provided guidelines for compliance and fulfillment of such obligation.
In no uncertain terms, the RMC states that social media influencers are liable to be taxed. This is because under the Philippine Tax Code, Filipino citizens (both resident and non-resident), domestic corporations, resident and non-resident aliens, and resident foreign corporations are all subject to taxation, just in differing degrees and scope.
The RMC then proceeds to define social media influencers as all taxpayers, whether individuals or corporations, who receive income, whether in cash or kind, from any social media site and platform in exchange for services performed as bloggers, video bloggers or “vloggers,” or as influencers in general. Further, the RMC states that influencers, other than corporations and partnerships, are classified for tax purposes as self-employed individuals or persons engaged in trade or business as sole proprietors, and therefore their income is classified and taxable as business income.
Notably, under the RMC, despite the above definition of influencers, the influencers’ taxable incomes are not limited to those they receive from social media sites and platforms such as YouTube, but also include income derived from other sources such as sales of their products, as well as from any fees and products paid or sent to them by brands and corporations whom they partner with. For illustration, the BIR has enumerated such income streams in the RMC.
The RMC identifies two main taxes applicable to the influencer’s income: Income tax and business tax in the nature of value-added taxes (VAT) or percentage tax. Ordinarily, for income tax, the applicable rate is the graduated income tax rate of 0 percent to 35 percent based on their net taxable income. However, such rate varies for self-employed individuals whose gross sales or gross receipts and other non-operating income do not exceed the VAT threshold of P3,000,000, or non-resident aliens who are not engaged in trade or business in the Philippines.
For the self-employed individual who meets the condition above, the applicable tax rate is 8 percent on gross sales or gross receipts and other non-operating income in excess of P250,000, which is already payable in place of the graduated income tax rates and percentage tax. For the non-resident not engaged in trade or business in the country, however, the applicable tax rate is 25 percent based on his/her entire income received from the Philippines.
For business tax, the applicable tax rate is either the 12 percent VAT when the gross sales or gross receipts and non-operating income of the taxpayer exceeds the VAT threshold or 8 percent on gross sales or gross receipts, in lieu of the graduated tax rate and percentage tax, when such gross sales or receipts do not exceed the VAT threshold.
Under the RMC, however, influencers, being self-employed individuals or persons engaged in trade or business, are allowed to deduct from their gross income, the ordinary and necessary business expenses they have incurred to produce their vlogs or content, such as but not limited to filming expenses, computer equipment, subscription and software licensing fees, Internet and communication expenses, and other analogous fees. To be deductible, such expenses must be directly and exclusively related to the production or realization of the income and can be substantiated with sufficient evidence such as BIR-registered receipts and invoices. Further, depending on the circumstance, an influencer may claim a tax credit for income taxes paid or incurred to a foreign country.
To comply with his/her tax obligations, registration (or updating of existing registration) is the first step, as provided for in the RMC. For taxpayers who are unregistered with the BIR, registration may be done by the taxpayer by securing their Tax Identification Number from the RDO having jurisdiction over the taxpayers’ place of residence. For those who are already registered, the BIR reminds influencers of the importance of updating their registration so that their registration may reflect their existing line of business.
Considering the emergence of Internet activities as viable sources of income, the BIR is correct in its statement in the RMC that now is indeed the opportune time to discuss the tax obligations of social media influencers. For those who are already in such line of business or exploring the same, it is important to know their duties and rights under our tax laws.
