Bureau of Internal Revenue released a memo clarifying the tax on social media influencers, individuals, and businesses. But who are the social media influencers according to the BIR? What are the obligations to be resolved? And why did the BIR issue this memorandum?
According to BIR, they obtained reports that a few social media influencers did not pay income tax in spite of generating huge profits from various social media platforms. The agency additionally stated that there had been reports that some were not registered with the BIR or that they had been registered for different taxes or lines of business, however, they don’t record their earnings on social media.
BIR states that the ultimate goal is to increase revenue from their unreported income and remind them of their tax obligations under the law and the potential consequences of tax evasion.
According to the memo, “social media influencers” such as all individuals or entities, who get hold of profits in-kind or in-cash from any website or platform of any social community in exchange for provided services as a blogger, vlogger, brand ambassador, or influencer, and for every other activity carried out on said websites and social media platforms.
In other words, if you make money from social media, you pay taxes.
The income of influencers is generally considered to be a business income subject to regular income tax, except for those that are ultimately taxed or exempt under applicable law. Business income is subject to general income tax, including but not limited to any amount received in cash or in-kind from YouTube Affiliate or Partner programs, sponsored blogs and social media posts, display advertising, becoming a brand spokesperson or ambassador, affiliate marketing, co-creation of project lines, promotion of own products, sale of photos and videos, online courses, subscriptions, e-books, podcasts, and webinars.
Social media influencers also are responsible for business tax, which can be both be percentage or VAT.
The BIR also clarifies allowable deductions from gross income, which are expenses paid or incurred related to generating or realizing income, provided that the influencer can provide receipts and the invoice is recorded in the BIR.
If an influencer attempts to evade or defeat tax, that’s punishable by a fine not less than PHP 500K, but not more than PHP 10M, and imprisonment of not less than 6 years but not more than 10 years. Also, if they fail to file a return, supply correct and accurate information, pay tax to withhold and remit tax, and refund excess taxes withheld, it’s punishable by a penalty of not less than PHP 10K and imprisonment of not less than 1 year but not more than 10 years.
In other words, absolutely everyone who makes an income is taxable.
It’s the law. Even the freebies in purchases or prizes you gained in contests like gadgets, makeup kits, appliances, and trips. Sometimes, the companies that gave those freebies have already shouldered the taxes. Sometimes, they may be not, so the recipient is liable for declaring them. The standard process includes an Official Receipt (OR). This is the basis for declaring that a service fee has been received in exchange for promotion.
A tax of any income is nothing new. The BIR is simply reminding everyone, especially, the social media influencers, to voluntary and honestly declare their income and pay their corresponding taxes.
For more information, you can always tune in to KeepSmart Consultancy for the latest updates about business, accounting, and taxation. Also, we are posting snippets of content across our social media channels and posting an in-depth guide on free lesson guides about accounting, business, and taxation on our KeepSmart Academy website.