REVENUE MEMORANDUM CIRCULAR (RMC) NO. 97 2021
This issuance covers the tax liability of social media influencers, allowable deductions, tax compliance, and effects of taxes withheld in other countries of which they can opt to report under EITR (8% Income Tax Rate), 40% OSD (Optional Standard Deduction), and GITR (Graduated Income Tax Rate) regime.
WHO ARE SOCIAL MEDIA INFLUENCERS
The term “social media influencers” refers to 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 LIABILITY OF SOCIAL MEDIA INFLUENCERS
The income of social media influencers is now subject to tax based on their earnings fromYouTube Partner Program, sponsored social and blog posts, display advertising, becoming a brand representative/ambassador, affiliate marketing, co-creating product lines, promoting own products, photo and video sales, and digital courses, subscriptions, and e-books, among others.Non-monetary payments (NMP) and free products received are considered as income and shall be declared for taxation based on their fair market value.
Social media influencers who were treated as self-employed individuals shall have the option to avail the 8% tax in lieu of the graduated income tax rates and percentage tax, if they do not exceed the VAT threshold of Php 3,000,000 per year. Mixed income earners be taxable under the GITR (Graduated Income Tax Rate) or OSD (Optional Standard Deduction)or both. Social media influencers may also be subjected to VAT should their income meet the annual VAT threshold of Php 3,000,000.
ALLOWABLE DEDUCTIONS FROM GROSS INCOME
Social media influencers may avail itemized deduction under Section 34(A) to (l) of the Tax Code, as amended, or Optional Standard Deduction (OSD) up to 40% of gross sales/receipts for individuals or 40% of gross income (Revenue less Deducible Direct Cost) for corporations. Allowable itemized expenses may be claimed as deductions provided that they are directly and exclusively related to the production or realization of the income and can be substantiated with sufficient evidence, such as BIR-registered receipts and invoices.
TAX COMPLIANCE AND REPORTING
Social media influencers should register with the BIR. Registered influencers must ensure that their registration reflect their existing line of business or update their registration information by filing BIR Form No. 1905 with the RDO where they are registered. They should always refer to Certificate of Registration (COR) for filing and payment of tax returns. If applicable, they should also withhold required creditable/expanded withholding tax, final tax on compensation of employees, and other withholding taxes.
Section 232 of the NIRC requires a taxpayer to keep books of accounts duly registered with the BIR. In addition, the taxpayers whose gross annual sales earnings exceed P3 million shall have their books of accounts audited and examined yearly by independent Certified Public Accountants and their income tax returns accompanied with a duly accomplished Account Information Form (AIF).
EFFECT OF TAXES WITHHELD IN FOREIGN COUNTRIES
In addition, any income taxes paid or incurred from foreign country with which the Philippines has a tax treaty may avail of the tax treaty benefits or may either be claim the tax as an item of deduction or as a tax credit but subject to limitations provided for in the Tax Code, as amended, and this RMC.
LIABILITIES FOR FAILURE TO FILE RETURNS AND PAY TAXES
Fines and Penalties under the Tax Code will apply for an attempt to Evade or Defeat tax, punishable by a fine of P500,000 to Pl0,000,000 and imprisonment of 6 to 10 years. In addition, failure to file return, supply correct and accurate information, pay, withhold and remit tax and refund excess taxes withheld on compensation are punishable by a fine of not less than P10,000 and suffer imprisonment of 1 year to ten 10 years.
Influencers are, therefore, advised to voluntary and truthfully declare their income and pay their corresponding taxes before a formal investigation is conducted by BIR to avoid being liable for tax evasion and for the civil penalty of fifty percent (50%) of the tax or of the deficiency tax.
The circular took effect on August 16, 2021
Enclosed also is a copy of RMC 97-2021 for your reading pleasure.
DISCLAIMER: The advisory is not a substitute for an expert opinion and is purely a general research that may have not considered the entirety of other related topics. Any tax and/or compliance advice is not intended or written by the author to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on by the regulatory bodies, or (ii) promoting, marketing, or recommending to another party any matters addressed herein.
The opinion or advice expressed in this advisory is based on the facts and circumstances gathered. Any inaccuracy in any of the assumptions set forth above may have the effect of changing all or part of this report, and this report may not apply. The advice is based on our interpretation of the provisions of the Code, the Revenue Regulations promulgated and issued by the tax bureau, BIR positions as set forth in published Revenue Rulings, other pronouncement, orders and circulars, and judicial decisions in effect on the date of this report, any of which could be changed at any time. Any such changes may be retroactive and could significantly modify the statements and opinions/ advice expressed herein In effect, this might render the advisory obsolete or incorrect in partial or in full. We undertake no obligation to advise you of changes that may hereafter be brought to our attention.
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