MANILA, PHILIPPINES — The Bureau of Internal Revenue‘s recent memo zooming in on social media influencers has certainly captured the attention of Filipino netizens. Here is an explainer from online tax filing & payment platform Taxumo to help today’s online content creators understand the memorandum’s contents.
If you’re an influencer, you may have opened your phone this morning with news reports of BIR doubling down on your industry. But there’s no need to worry.
As the Philippines’ pioneering tax filing and payment platform for self-employed professionals and sole proprietors (that includes social media influencers!), Taxumo is here to ease your worries by explaining the key concepts around BIR’s latest memo, RMC 97-2021.
What do you mean I have to pay taxes?
There are two things in life that are constant: death and taxes. So whether you’re employed, a multinational company, or in this case an influencer, you are required to file taxes.
Under Philippine law, anyone who’s earning outside of employment (e.g. freelancers, doctors, small business owners) must register and declare their incomes properly.
So, this isn’t anything new. Regardless of what your business or occupation is, you have always been required to file taxes.
So why is the BIR targeting influencers?
This isn’t the first time the Bureau of Internal Revenue zeroed in on a particular group.
Last year, the BIR issued RMC 60-2020 to call out online shop owners to register their businesses and pay their taxes.
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.
RMC 97-2021 in more detail
Now that we’ve established that, as an influencer, you need to file taxes, let’s simplify the 4-page long memorandum.
Influencers as defined by the BIR
According to the memorandum, influencers are defined as:
“…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.”
In short, if you’re earning in any capacity from the different social media platforms, you’re on the hook for taxes. The memorandum actually puts out an extensive but not exclusive list of the different ways influencers earn.
Taxes for Influencers
RMC 97-2021 does a good job of summarizing the types of taxes that need to be filed by influencers. Let’s discuss them briefly:
Income Tax
As mentioned in the previous sections, if you’ve earned compensation in any way from being an influencer, you are liable to pay income tax. Note that income tax is paid not just on the April 15 deadline but is actually filed every quarter.
Income tax is actually such a long topic so you can refer to our blog post on filing income tax returns for more details.
Business Tax
There are 2 kinds of business taxes in the Philippines: Percentage Tax and Value Added Tax.
Percentage Tax is for those whose gross annual income is less than Php 3 million. You pay 1% of your GROSS income quarterly.
Note: The Percentage Tax rate is temporarily reduced to 1% as per the CREATE Law. This will revert back to 3% after [insert date]
It’s a bit more complicated but, basically, if you earn at least Php 3 million, then you’ll have to pay VAT: when you collect payment, you also have to collect 12% of that amount (the VAT) which you then have to remit to the government. This one happens monthly AND requires that you submit some attachments that detail your transactions.
Allowable Deductions
As a business owner, you’re able to deduct business expenses from your income to lower your taxable income (and thus, your tax payments).
A great thing about this latest memorandum is that it 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.g. 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.
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% of gross income. As a result, you’ll have lower income tax payables.
Double Taxation
Interestingly, one of the benefits cited by the BIR is avoiding Double Taxation when you’ve received payment from a person who’s not from the Philippines.
So, what is this Double Taxation?
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. 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.
Now, that’s where the Tax Residency Certificate (TRC) comes in. It allows you to claim benefits such as counting as tax credits the amounts that the foreign country has already deducted from you. But keep in mind that benefits may differ between different tax treaties of the Philippines and other countries.
It’s now time to register
Regardless of what the new memo says though, as an influencer, it’s best to register as a professional or a business. Not only does it relieve you of stress from memorandums like this but it also has a whole host of benefits for you as an influencer:
Bigger and Better Clients
If you want to expand your services to bigger businesses and corporations, then you should have Official Receipts ready. A lot of businesses in the country usually avoid individuals who aren’t BIR-registered.
So, if you’re setting your eyes on that endorsement deal, you should keep this in mind.
Loan Approval
If you have a big-ticket purchase coming up such as a house or a car, then it would be in your best interest to increase your income for better chances of getting your loan approved. One good way to do that is to declare your influencer incomes on your income tax returns. This not only shows you’re in a better financial position to pay off the loan but you also have multiple income streams (if you’re also working as an employee).
Travel Abroad
Like the rest of the whole world, you’re also itching at that trip to Japan, Europe, or the United States. But unfortunately for Filipinos, a lot of these first-world tourist destinations require proof of income for visa approval. And so, like getting a loan, it’s a good idea to pad your income tax returns with additional income.
An easier way to get registered
Just in case you need help with registering with the BIR, we offer a business registration service specifically for self-employed individuals like you. With this service, our partner accountant will process your registration for you. This way, not only can you avoid going outside and possibly contracting COVID, but you can also rest assured that your registration is done correctly.
To file and pay taxes easily, sign up at www.taxumo.com. And if you have more questions, talk to Taxumo customer support by chatting with us through the website, or sending an email at customercare@taxumo.com.
About Taxumo
Taxumo, the Philippines’ pioneering online tax filing & payment platform, is the easiest way for small business owners, self-employed professionals, and freelancers in the Philippines to prepare, file, and pay their taxes. With Taxumo, all you need to do is put in your income and expenses, and Taxumo does the rest (from computing your tax dues, to filling up your BIR tax forms, then paying your taxes–all online!)
