HOW TO REDUCE TAX ON INCOME OF SOCIAL MEDIA INFLUENCERS (REVENUE MEMORANDUM CIRCULAR NO. 97-2021)

REVENUE MEMORANDUM CIRCULAR NO. 97-2021: Taxing the Income of Social Media Influencers

BIR issued last August 16, 2021, the Revenue Memorandum Circular No. 97-2021, which clarifies the taxation of income received by Social Media Influencers. This is to promote the regularity of the business by doing Social Media Influencer Marketing scheme. 

In previous years, companies would hire celebrities to appear in a TV commercial or to pose on a billboard just to market their products and to reach a wider audience. With social media influencer marketing, a brand or company can now easily promote its products or business through sponsored posts or by partnering with influencers and placing ads on any content of its choice, preferably on the channel of influencers with a significant number of followers, among others. Influencer marketing has thus become a vital part of the marketing strategies of these companies and the new norm for digital marketing, being one of the most effective ways nowadays to communicate with a brand's target audience or improve brand awareness.

OBJECTIVE OF THE MEMORANDUM CIRCULAR

The circular issued is to clarify the tax obligations of all social media influencers, individual or corporation, with the end goal of raising revenues from their undeclared income and at the same time, reminding them of their obligations under the law and of the possible consequences of their failure to pay taxes.

The Bureau of Internal Revenue (BIR) has been receiving reports that certain social media influencers have not been paying their income taxes despite earning huge income from the different social media platforms. There are also reports that they are not registered with the BIR or are registered under different tax types or lines of business but are also not declaring their earnings from social media platforms for tax purposes. Whatever may be the reasons, it is now the most opportune time to discuss the tax obligations of these social media influencers.

WHAT SOCIAL MEDIA INFLUENCER MEANS ACCORDING TO THE MEMORANDUM CIRCULAR?

The term "social media influencers" referred to in this Circular includes 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.

TAX LIABILITIES OF SOCIAL MEDIA INFLUENCERS

The Social Media Influencers, unless exempted pursuant to the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, and other existing laws, social media influencers shall be liable to the following taxes and regulatory compliances:

• Income tax
• Business taxes like VAT or Percentage Tax
• Registration of business to BIR
• Keeping of books of accounts
• Filing and payment of taxes mentioned above
• Obligation to withhold if applicable

HOW TO REDUCE POSSIBLE TAX EXPOSURES?

If you are an influencer, e.g. YouTubers or Tiktokers for instance, the common business expenses that may be deducted from your gross income include, but are not limited to, the following:

1. filming expenses (cameras, smartphones, microphone and other filming equipment);
2. computer equipment;
3. subscription and software licensing fees;
4. internet and communication expenses;
5. home office expenses (ex. proportionate rent and utilities expenses);
6. office supplies;
7. 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.);
8. depreciation expenses; and
9. bank charges and shipping fees.

These expenses must be duly supported with commercial invoices or official receipts in order to claim expenses. Otherwise, BIR will not allow those expenses. The expenses properly claimed will be deducted from the total income received from sponsors, or endorsed products or services. Thus, lowering your tax base.

HOW ABOUT THE INCOME TAX DEDUCTED FROM OUTSIDE THE PHILIPPINES?

The income taxes you paid outside the Philippines like federal tax deductions made by Youtube, Facebook, or Instagram, can be claimed as a TAX CREDIT. Yes! You heard it right. From the income tax due, you can deduct the taxes you paid from other countries as a tax credit. So this is how your taxes be computed:

Sample Computation:

GROSS INCOME (received from all sources)                              10,000,000.00

Less: ALLOWED BUSINESS EXPENSES                                    1,000,000.00

TAXABLE INCOME                                                                     9,000,000.00

 

TOTAL TAX DUE                                                                           2,760,000.00

Less: FOREIGN TAX CREDIT                                                       1,500,000.00

REMAINING TAX DUE TO BE PAID TO BIR                         1,260,000.00

To fully maximize your tax deductions and to properly file and pay the correct taxes. I recommend that you hire accountants or CPAs that will manage your taxes and income tax returns. Enjoy the hassle-free of doing business so you can focus on growing your audience and making more valuable contents.

You can visit this link if you want a top-caliber accountant

Click the link for the full copy of RMC 97-2021