Social Media Influencer Tax Guide

The influencers’ tax from BIR is waving!

The new responsibility of digital creators on their channels or brands is official. Aside from engaging content to keep their followers growing, they also need to attend to their financial obligations to the country. Vlogging and social media videos begin as entertainment until creators discover the lucrative business they can get into in this time of national crisis, where means of earning are limited.

Rumor has it that the tax has rattled some social media personalities and made them close their channels or platforms. But the most important thing you need to know is how this taxation works.

Who are considered influencers?

BIR defines social media influencers as individuals or corporations who receive income, regardless of in cash or kind, from social media platforms and digital channels. These refer but are not limited to popular sites like YouTube, TikTok, Facebook, Instagram, and Twitter.

Influencers are not necessarily celebrities or prominent names. As long as you have followers and are earning from social media platforms, you are considered influencers. Even young children can be called social media influencers.

What is Influencers’ Tax?

The influencers’ tax is made public on August 16, 2021, as the 97th issuance under Revenue Memorandum Circulars of 2021. The circular discusses the taxation of income earned by social media influencers.

The taxes placed to the various income sources such as:

  • profits from YouTube Partner programs
  • Sponsored digital content
  • Display advertising
  • Becoming a brand representative or ambassador
  • Affiliate marketing
  • Co-creation of project lines
  • Promotion and selling of own products or merchandise
  • Sales of photos and videos
  • Sales of subscriptions, podcasts, or e-books
  • Other digital products or services

It is worth noting that the free products influencers receive in return for the promotion of these products in their social media platforms or vlog channels should be declared as income (based on the fair market value of the products).

When a social media influencer or vlogger gets the payment for these products or services, it is considered profit or gain. No matter how the influencer is paid, it still signifies a business or conduct of trade.

Why are Influencers Taxed?

RMC Memorandum 97-2021 is not a new law but rather an expansion under the National Internal Revenue Code. In general, anyone who earns through Philippine sources needs to pay for income tax and business tax.

The taxpayers classified can either be a citizen or alien:

  • Resident citizens (RC) of the Philippines earn profit through the sources within and outside the country.
  • Non-resident citizens (NRCs) are taxable for their income earned within the Philippines.
  • Resident aliens (RAs) are also taxable solely on their income gained within the country.
  • Non-resident aliens (NRAs), like NRCs and RAs, are taxable only on their income earned through the sources in the Philippines.
  • Local corporations earning within and outside the country
  • Foreign corporations whose income are earned within the Philippines

How much is the tax for influencers?

Computing for your taxes is a tedious task, but here are the basic details:

For influencers earning less than P250,000 annually

Under the TRAIN Law, if your annual income is below P250,000, you are exempted from paying income tax returns. However, you still need to file even despite not being required to make a tax payment.

For influencers earning more than P250,000 annually

The TRAIN Law provides two (2) options for taxpayers: graduated income tax and 8% gross receipt tax.

  • Graduated income tax – this refers to the tax rate between 0% to 35% depending on the next taxable income (income minus business expenses).
  • 8% gross receipt tax – an option for non-VAT taxpayers (both citizens and resident aliens), as long as the total gross sales receipt does not amount beyond P3 million on the taxable year. There are, however, necessary filing conditions that apply.

For non-resident aliens not engaged in business in the Philippines

NRANEBs are liable for 25% tax based on gross income.

For mixed-income earners:

It refers to anyone earning income both from compensation and business at the same time. The applicable tax will follow the same graduated rates or 8% gross receipt, as long as the total gross sales or receipts do not exceed the VAT threshold of P3 million. More than that, VAT applies.

What are the deductions allowed for influencers?

You can legally lessen your income tax payment, but this is possible if you choose the Graduated Income tax with Itemized Deductions. These are expenses you can subtract from your income:

  • computer equipment and filming devices (smartphones, cameras, microphone)
  • fees on subscriptions, software licensing, internet, and communication
  • expenses on the home office (rent, utilities) and office supplies
  • business expenses (transportation expenses, payment to companies or independent contractors for creative and production services, including advertising and marketing costs)
  • shipping fees and bank charges
  • depreciation expenses

Another option is the optional standard deduction, wherein you declare to BIR that your expenses are 40% of your total income. By doing so, those who have expenses lesser than 40% of gross income will have lower tax payables.

What is Double Taxation?

Now that it’s easy to work in other countries via remote setup, double taxation is taken care of. Double taxation refers to the taxes applied to you from the country you are from and taxes applicable to you from the country you are working for.

To avoid double taxation, countries forged tax treaties. It helps in saving your paycheck from depletion. You only need to declare your Philippine residency to these countries you are conducting the trade. It highlights the importance of registering as social media influencers with BIR.

How can online influencers register?

As mentioned in RMC 97-2021, vloggers and social media influencers will be liable for income tax. Therefore, you are mandated to register with the Revenue District Offices (RDO) of BIR assigned to the area of their residence. If you already have a record on file, they only need to update your information. Get classified as self-employed individuals or sole proprietors of the said trade or business.

Benefits of Registration as Influencers

Once you’re registered, the benefits are:

So, if you are a social media influencer who has been hustling for quite a long time now and earning income taxable according to tax codes, you better get yourself registered and pay your dues.