The Bureau of Internal Revenue issued Revenue Memorandum Circular 97-2021 earlier this month. The circular essentially clarifies the income generated by social media influencers, or those who are earning by producing content through online platforms such as Facebook, Instagram, YouTube, TikTok, and many others. It also reminds these content creators to pay the required income and business taxes.
Even the Creator and Influencer Council of the Philippines (CICP) issued a statement welcoming the issuance of this circular. "We would like to commend the BIR in issuing the said Circular as it gives a general overview of all the tax rules and regulations that are applicable to the members of our organization," it said. "Furthermore, the said Circular provides information as to how our members could benefit from certain tax treaties between the Philippines and its partner countries. Ultimately, this information will help our members in avoiding double taxation."
Clearly, the Philippines has a small but thriving industry of content creators that are earning income through these relatively new platforms. And while the new BIR circular may cause some confusion and anxiety, the reality is that these creators and influencers need not worry.
According to online tax payment platform Taxumo, this isn't the first time the BIR issued a reminder to a specific industry or community. "Last year, the BIR issued RMC 60-2020 to call out online shop owners to register their businesses and pay their taxes," Taxumo said in a news release. "The pandemic has given rise to new industries and professions and that definitely includes influencers. And they even acknowledged the growth of the influencer industry in the first section of the memorandum. So don't worry, just think of this as a friendly nudge from your local neighborhood taxman."
BIR reminder to social media creators and influencers
To start with, the BIR's circular includes an official definition of creators and influencers. And these are "...all taxpayers, individuals or corporations, receiving income, in cash or in kind, from any social media sites and platforms (YouTube, Facebook, Instagram, Twitter, TikTok, Reddit, Snapchat, etc.) in exchange for services performed as bloggers, video bloggers or 'vloggers' or as an influencer, in general, and from any other activities performed on such social media sites and platforms."
Taxumo says, "In short, if you're earning in any capacity from the different social media platforms, you're on the hook for taxes."
There are two types of taxes that influencers need to file: income and business taxes. Income tax, of course, is what you owe if you earn any type of income as a creator or influencer. Business taxes, meanwhile, can be either percentage tax or Value Added Tax (VAT).
According to Taxumo, you're allowed to deduct business expenses from your income to lower your taxable income (and, thus, decrease your tax payments). The latest memorandum also outlines possible examples of what can be deductible as an influencer:
- filming expenses (cameras, smartphones, microphone and other filming equipment);
- computer equipment;
- subscription and software licensing fees;
- internet and communication expenses;
- home office expenses (ex. proportionate rent and utilities expenses);
- office supplies;
- business expenses (e.x. travel or transportation expenses related to YouTube business, payment to an independent contractor or company for video editing, costume designer, advertising and marketing costs (cost of contests and giveaway prizes, etc.);
- depreciation expense;
- bank charges and shipping fees
"Do take note that you're only able to deduct expenses if you've opted into the Graduated Income Tax Rate with Itemized Deduction," Taxumo says. "Alternatively, you may choose the Optional Standard Deduction where you can declare to the BIR that your expenses are 40% of your total income. This is beneficial if your expenses are less than 40 percent of gross income. As a result, you'll have lower income tax payables."
The BIR also addressed the issue of double taxation in the circular. Basically, double taxation is when you've paid taxes twice on the same source of income.
"In this case, you were taxed by the country of origin and you're also paying taxes on that same income in the Philippines," Taxumo says. As a result, your take-home pay is a lot less than what you've expected. This is why tax treaties have been formed between different countries all around the world. It allows taxpayers relief from being taxed twice.
If you're planning on becoming a social media content creator or influencer, Taxumo suggests registering as a professional or business. Not only does it give you peace of mind, but it also offers some benefits, including acquiring bigger clients (that ask for official BIR receipts from the people on social media they work with), and higher chances of approval for bank loans and visa applications (lesser questions when you have higher income).
Just in case you need help with registering with the BIR, Taxumo offers a business registration service specifically for self-employed individuals. To file and pay taxes easily, sign up at Taxumo.
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