Foreign 'vloggers' not exempted: Breaking down BIR tax on social media creators, influencers

MANILA, Philippines — The Bureau of Internal Revenue (BIR) calls on social media influencers to observe proper tax compliance.

Social media influencers such as vloggers are called to practice due diligence by paying their taxes properly as the BIR issued Circular No. 97-2021 yesterday to remind social media influencers of their tax duties as mandated by law.

The bureau said that it has come to their attention that "certain" social media influencers have not been paying income taxes despite earning huge income from different social media platforms.

There were also those who were not registered with the BIR or were registered under different tax types or lines of business but were not declaring their earnings from social media platforms for tax purposes."

BIR defines 'influencers'

The BIR defined social media influencers as "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 influencers, in general, and from any other activities performed on such social media sites and platforms."

Even foreign 'vloggers' should pay

The Circular, signed by Commissioner Caesar R. Dulay, cited Section 23 of the National Internal Revenue Code (NIRC) in the passing of the circular. It said that citizens of the Philippines residing within and domestic corporations are taxable on all income derived from sources "within and without the Philippines" while non-resident citizens, resident, non-resident aliens and resident foreign corporations are taxable on income derived from sources within the Philippines.

It also highlighted that social media influencers other than corporations and partnerships are classified as self-employed individuals or persons engaged in trade or business as sole proprietors. Their income then is generally considered business income.

Taxable incomes

The 10-page circular enumerated the income sources and gave a sample breakdown of taxable income.

It said social media influencers derive their income from the following sources:

• YouTube Partner Program;
• sponsored social and blog posts;
• display advertising;
• becoming a brand representative or ambassador;
• affiliate marketing;
• co-creation of product lines;
• promotion of own products;
• photo and video sales;
• selling of digital courses, subscriptions and e-books;
• and conducting podcasts and webinars.

Free products received by social media influencers in exchange for promotion on their social media platforms must declare the fair market value of said products as income.

Income treated as royalties in another country, including payments under the YouTube Partner Program, are included in the computation of gross income and are subjected to the schedular or corporate tax rates.

Resident aliens, meanwhile, are reminded that any income derived from Philippine-based contents are generally taxable.

The Circular also emphasized that apart from income tax, social media influencers are also liable for business tax, which may either be percentage or value-added tax (VAT).

Tax cuts

There are allowable deductions from the gross income of social media influencers. It cited the case of YouTubers whose allowable deductions include:

• filming expenses;
• computer equipment;
• subscription and software licensing fees;
• Internet and communication expenses;
• home office expenses;
• office supplies;
• business expenses such as travel or transportation expenses
• payment to independent contractor for video editing;
• depreciation expense;
• bank charges;
• and shipping fees.

Penalties

Social media influencers who fail to file returns, pay taxes and supply accurate and correct information are held criminally liable under Sections 254 and 255 in relation to Section 248 (B) of the NIRC.

Any person who willfully attempts to evade paying taxes will be punished by a fine not less than P500,000 but not more than P10 million and will be imprisoned from six to 10 years under Section 254.

Those who fail to file returns, supply correct information, pay tax withheld and remit tax will face similar sanctions under Section 255. They will be punished with a fine not less than P10,000 and be sentenced to imprisonment of not less than one but not more than 10 years.

The Circular stressed that under Section 248 (B), a substantial under-declaration of taxable sales, receipts or income or a substantial overstatement of deductions constitute prima facie evidence of a false or fraudulent return.

It also reminded content creators on YouTube regarding the announcement of Google LLC, owner of YouTube, that any payments from YouTube will be treated as royalties starting June 1, 2021. The United States Internal Revenue Code under Chapter 3 requires Google to collect tax information, withhold taxes and report to the US authority when a creator on YouTube earns royalty revenue from viewers in the US while creators outside the US are advised to submit tax information to Google LLC.

The BIR said it has advised its concerned offices to conduct a full-blown tax investigation on social media influencers residing and/or registered within respective jurisdictions to enhance tax compliance among them.