Philippines – If you are a content creator who earns money from social media platforms such as Facebook, Instagram, YouTube, and others, you might be wondering how to deal with your taxes. In this article, we will discuss the tax guidelines for influencers in the Philippines and why you should comply to avoid scrutiny from the Bureau of Internal Revenue (BIR).
Who are considered influencers?
According to BIR Revenue Memorandum Circular (RMC) 97-2021, influencers are defined as all taxpayers, individuals or corporations, receiving income, in cash or any kind, from any social media sites and platforms in exchange for services performed as bloggers, video bloggers or “vloggers” or as an influencer, in general, and from any other activities conducted on such social media sites and platforms.
This means that if you make money from posting videos, photos, stories, reviews, or any other content on social media platforms, you are considered an influencer and you have to pay taxes on your income.
What are the applicable taxes for influencer?
As an influencer, you are required to pay income tax and business tax on your earnings from social media platforms. The income tax rate depends on whether you are registered as a sole proprietor or a corporation. The business tax rate depends on whether you are subject to value-added tax (VAT) or percentage tax.
Income tax
If you are registered as a sole proprietor or a freelancer, you have to pay income tax based on the graduated rates under the Tax Reform for Acceleration and Inclusion (TRAIN) Law. The rates range from 0% to 35%, depending on your taxable income. You can also avail of the 8% flat income tax rate if your gross sales or receipts do not exceed P3 million and you are not VAT-registered.
If you are registered as a corporation, you have to pay income tax based on the corporate income tax rate under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law. The current rate is ranging from 20% to 25% based on the net taxable income for domestic corporations and resident foreign corporations, and 30% for non-resident foreign corporations.
Business tax
If you are registered as a VAT taxpayer, you have to pay 12% VAT on your gross sales or receipts that exceed P3 million in a calendar year. You can also claim input VAT credits on your purchases of goods and services that are subject to VAT.
If you are registered as a non-VAT taxpayer, you have to pay 3% percentage tax on your gross sales or receipts that do not exceed P3 million in a calendar year.
What are the allowable tax deductions for influencers?
As an influencer, you can deduct certain expenses from your gross income to reduce your taxable income. These expenses must be ordinary and necessary for your trade or business and must be supported by official receipts or invoices.
Some examples of allowable deductions are:
• Advertising and promotion expenses
• Communication expenses
• Depreciation expenses
• Professional fees
• Rent expenses
• Supplies expenses
• Transportation expenses
What about double taxation for influencers earning outside of the Philippines?
If you earn income from social media platforms that are based outside of the Philippines, such as YouTube or Facebook, you might be subject to withholding taxes by the foreign entity that pays you. This could result in double taxation if you also pay income tax in the Philippines on the same income.
To avoid double taxation, you can check if the Philippines has a tax treaty with the country where the foreign entity is located. A tax treaty is an agreement between two countries that provides relief from double taxation by allocating taxing rights and reducing withholding tax rates.
For example, the Philippines has a tax treaty with the United States that reduces the withholding tax rate on royalties (which include payments for online advertising) from 30% to 15%. This means that if you earn income from YouTube or Facebook that is subject to withholding tax by the US entity, you only have to pay 15% instead of 30%. You can then claim this amount as a foreign tax credit when you file your income tax return in the Philippines.
How to register with BIR as an influencer?
If you are an influencer who earns money from social media platforms, you have to register with BIR as a taxpayer and comply with the applicable tax obligations. Here are the steps to register with BIR:
1. Register your business name with the Department of Trade and Industry (DTI). You can do this online through the DTI Business Name Registration System (BNRS).
2. Secure a Certificate of Registration (COR) from BIR. You can do this online through the BIR eRegistration System (eREG) or offline through your Revenue District Office (RDO). You will need to fill out BIR Form 1901 (for sole proprietors) or BIR Form 1903 (for corporations) and submit the required documents, such as your DTI certificate, proof of address, and valid ID. You will also need to pay the registration fee of P500 and the documentary stamp tax of P15.
3. Register your books of accounts and invoices or receipts with BIR. You can do this online through the BIR Electronic Registration and Invoicing System (eREGIS) or offline through your RDO. You will need to present your COR and your books of accounts and invoices or receipts for stamping and validation.
4. File and pay your taxes regularly with BIR. You can do this online through the BIR Electronic Filing and Payment System (eFPS) or the BIR Electronic Tax Filing and Payment System (eTax) or offline through authorized agent banks (AABs) or revenue collection officers (RCOs). You will need to use the appropriate BIR forms and schedules, such as BIR Form 1701Q (for quarterly income tax return) or BIR Form 2551Q (for quarterly percentage tax return).
Why should you comply with your tax obligations?
As an influencer, you have the responsibility to pay your fair share of taxes to the government. By doing so, you are contributing to the development of the country and the welfare of its people. You are also avoiding penalties, fines, and possible legal actions from BIR for non-compliance.
Moreover, by complying with your tax obligations, you are enhancing your credibility and reputation as a professional content creator. You are also opening up more opportunities for collaboration and partnership with other businesses and entities that require tax compliance as a prerequisite.
So, if you are a content creator who earns money from social media platforms, don’t forget to register, file, and pay your taxes with BIR. It’s not only your duty, but also your benefit.
