[Ask the Tax Whiz] Is the BIR only after top social media influencers?

Revenue Memorandum Circular (RMC) No. 97-2021 has been all over social media feeds since it was issued on Monday, August 16. Social media influencers are now wondering why the Bureau of Internal Revenue (BIR) is after their income. Should they be afraid? What will happen if they do not pay their taxes?

What is RMC 97-2021? Is it similar to RMC 60-2020? Who are “social media influencers” as defined in the circular? Does it mean those who are not listed are exempted from paying taxes? Is the BIR only going after the top social media influencers or content creators?

The BIR has been receiving reports that certain social media influencers have not been paying their income taxes despite earning big from various platforms. In response to this, RMC 97-2021 was issued to clarify the tax obligations of all social media influencers. The end goal is to raise revenues from their undeclared income while at the same time reminding them of their obligations under the law and of the possible consequences of their failure to pay taxes.

RMC 97-2021 is similar to RMC 60-2020 in the sense that the BIR also clarified the tax obligations of persons conducting business transactions through the use of electronic platforms or digital means. While RMC 60-2020 did not mention social media influencers, it focused on partner sellers/merchants, payment gateways, delivery channels, internet service providers, and other facilitators.

Under Section 3 of RMC 97-2021, the term “social media influencers” includes all taxpayers – individuals or corporations – receiving income, in cash or in kind, from any social media site or platform (YouTube, Facebook, Instagram, Twitter, TikTok, Reddit, and Snapchat, among others) in exchange for services performed as bloggers, video bloggers or vloggers, or as an influencer, in general, and from any other activities performed on the online platforms.

Note that unless otherwise exempted, the general rule is all are included and subject to tax. Therefore, all individuals, whether web designers or developers, online gamers, hosts, ambassadors, or livestreamers receiving cash or gifts – such as virtual gifts and gems – are included and taxable under the tax code.

While the BIR will logically prioritize the top influencers, it does not mean those who are earning less will not be investigated. Concerned BIR offices are mandated to conduct a full-blown investigation against social media influencers regardless of income earned.

What are the tax obligations of social media influencers? Are there any compliance requirements other than paying taxes? What happens if they fail to pay their taxes?

As reiterated under Section 3 of the BIR circular, unless exempted pursuant to the provisions of the National Internal Revenue Code of 1997 or under existing laws, social media influencers are liable for payment of income tax and percentage or value-added tax.

Social media influencers are required to register with the BIR, keep books of accounts, and file and pay their taxes as indicated in their Certificate of Registration (BIR Form 2303).

Under Section 254 of the tax code, tax violators shall be punished by a fine up to P10 million and imprisonment of not less than six years but not more than 10 years.

Are content creators on YouTube and those receiving income from abroad required to pay taxes even if their income has been subject to tax already? Can they just claim it as tax credit in case they decide to declare it to avoid double taxation? Is there a way to save from taxes especially for those who are earning less than P3 million?

Yes, they are required to pay taxes. Under Section 23 of the tax code, a resident citizen of the Philippines shall be taxable on all income derived from sources within and outside the Philippines.

However, they can apply for a Tax Residency Certificate (TRC) from the International Tax Affairs Division (ITAD) at the National Office of the BIR. Assuming the country where they earned income from has a tax treaty with the Philippines like the United States, they can make use of tax treaty benefits to claim foreign tax credits and avoid double taxation.

To know more about RMC 97-2021, you may watch our BIR IN ACTION Live on Monday, August 23, at 3 pm with the BIR, where we will discuss the circular in detail and answer questions of social media influencers. It will be simulcast live on the BIR Facebook page, TaxWhizPH YouTube channel, and FYE Channel via Kumu. You may also watch our YouTube episode on tips for Youtubers and influencers.

And yes, there is a way to save from taxes. Like individual taxpayers, social media influencers have options, too. Would you believe you could pay just 0% to 1% tax? It’s actually true, but you need to apply and comply with certain requirements. Use the QR code in the image below to attend a free webinar to help you get started and stay out of trouble with the BIR. Promo code is ACG10RAPPLER.

For more tax updates and information, follow the Asian Consulting Group on Facebook or email us at consult@acg.ph for a free tax assessment. – Rappler.com

Mon Abrea, CPA, MBA, is the co-chair of the Paying Taxes-EODB Task Force. With the TaxWhizPH mobile app as his brainchild, he was recognized as one of the Outstanding Young Persons of the World, an Asia CEO Young Leader, and one of the Ten Outstanding Young Men of the Philippines because of his tax advocacy and expertise. Currently, he is the chairman and CEO of the Asian Consulting Group and trustee of the Center for Strategic Reforms of the Philippines – the advocacy partner of the Bureau of Internal Revenue, Department of Trade and Industry, and Anti-Red Tape Authority on ease of doing business and tax reform. Visit www.acg.ph for more information or email him at mon@acg.ph and download the TaxWhizPH app for free if you have tax questions.