Are socmed influencers paying the right taxes?

The Bureau of Internal Revenue (BIR) is set to investigate an initial list of 250 social media (socmed) “influencers” to check if they have been paying their taxes.

In a report to Finance Secretary Carlos Dominguez III, the BIR said that Letters of Authority (LOAs) for the conduct of investigation were already issued to certain social media influencers found to be “top earners” in their field.

According to the BIR, socmed influencers who earn money from their posts on digital media are classified as self-employed individuals or persons engaged in trade or business as sole proprietors.

Their earnings are generally considered as business income, as defined under BIR’s Revenue Memorandum Circular (RMC) No. 97-2021 issued last Aug. 16.

“We encourage them to register, and then we have the profiling of over 250 personalities. We will do the investigation so that they would pay the necessary corresponding tax on their earnings,” BIR Deputy Commissioner Arnel Guballa said in his report to Dominguez during a recent Department of Finance (DOF) executive committee (Execom) meeting.

Under RMC 97-2021 issued last month, socmed influencers should pay income tax and percentage tax or, if applicable, the value-added tax (VAT), as mandated under the National Internal Revenue Code (NIRC) and other existing laws.

Based on the Circular, socmed influencers are defined as those who derive their income from the following sources: a) You Tube Partner Program; b) sponsored social and blog posts; c) display advertising; d) becoming a brand representative/ambassador; e) affiliate marketing; f) co-creating product lines; g) promoting own products; h) photo and video sales; i) digital courses, subscriptions, e-books; and j) podcasts and webinars.

The Circular states, among others, that socmed influencers who receive free goods in exchange for promotions must declare as income the fair market value of these products.

Income treated as royalties from another country, including payments under the YouTube Partner Program, shall likewise be included in the computation of the gross income of the socmed influencer and shall be subject to tax.

“It must be emphasized that the BIR also has the power to obtain information from foreign tax authorities pursuant to the Exchange of Information (EOI) provision of the relevant tax treaties. The BIR has the means to verify their income as it is clothed with a special power to obtain information from its treaty partners. The BIR may safely rely on the data provided by its treaty partners to establish the influencer’s tax liability,” RMC 97-2021 states.

“The social media influencers are, therefore, advised to voluntary and truthfully declare their income and pay their corresponding taxes without waiting for a formal investigation to be conducted by the BIR to avoid being liable for tax evasion and for the civil penalty of fifty percent (50 percent) of the tax or of the deficiency tax,” it says.

In order to avoid the risks of double taxation, the BIR advised socmed influencers receiving income from a non-resident person residing in a country with which the Philippines has a tax treaty to inform the latter that they are residents of the Philippines, and are, therefore, entitled to claim treaty benefits provided under the relevant tax agreement.

The Circular said socmed influencers who “willfully attempt to evade the payment of tax or willfully fail to make a tax return, to supply accurate and correct information or to pay tax” shall, in addition to the payment of taxes and corresponding penalties, be held criminally liable under the Tax Code.