A Complete Guide to Tax Obligations for Online Influencers in the Philippines 2022
- What this article will cover:
- BIR RMCs on Individuals Earning Through Digital and Online Platforms
- Applicable Taxes for Influencers in the Philippines
- Allowable Tax Deductions for Influencers
- Double Taxation for Influencers Earning Outside of the Philippines
- How to Register With BIR
As an online influencer in the Philippines, you must be familiar with the latest tax laws that apply to your profession. The Bureau of Internal Revenue (BIR) requires all persons earning through online and digital platforms to comply with income and business tax regulations. To help you understand the tax rules in the Philippines, this article will guide you through the necessary BIR tax obligations for online influencers in the Philippines.
BIR RMCs on Individuals Earning Through Digital and Online Platforms
With the rising popularity of online platforms being utilized to earn, transact, and do business, BIR released a series of memorandums to address the increasing growth of online entrepreneurs in the country. Revenue Memorandum Circulars (RMCs) 60-2020 and 97-2021 require “influencers” earning through online platforms to register and comply with applicable tax obligations provided by BIR to legally operate their business or practice their profession in the Philippines.
Revenue Memorandum Circular 60-2020
The COVID-19 pandemic has led to a surge of e-commerce and online businesses in the Philippines. That said, BIR released RMC 60-2020 to notify individuals and establishments conducting business transactions and operations through online platforms to comply with applicable tax requirements.
Under RMC 60-2020, businesses earning through online platforms such as Facebook Marketplace, Lazada, Shopee, and similar online marketplaces must register, file, and pay their taxes with BIR. Moreover, BIR requires newly-registered businesses to declare their past transactions voluntarily and pay the appropriate taxes associated with their income.
Revenue Memorandum Circular 97-2021
In August 2021, BIR released RMC 97-2021 to recognize and address the fast-paced evolution of industries and professions in the Philippines. That said, BIR took notice of the growing influencer industry in the Philippines.
Under RMC 97-2021, influencers are defined as all taxpayers, individuals, or corporations, receiving income, in cash or any 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 conducted on such social media sites and platforms.
Upon release of the memorandum, BIR noted that the memorandum merely aims to reiterate and clarify the tax obligations for individuals and businesses that earn through online or digital platforms, pursuant to RMC 60-2020.
Applicable Taxes for Influencers in the Philippines
The memorandum categorizes influencers into two classifications: self-employed and mixed-earners. The taxes applicable to influencers can vary depending on their employment situation. Generally, influencers are considered to be self-employed, requiring them to file their own taxes.
These are the taxes applicable to influencers:
- Income Tax. Under Section 23 of the National Internal Revenue Code (NIRC), a resident citizen of the Philippines shall be taxable on all income derived from sources within and outside the Philippines. Moreover, under Section 5 of the Tax Reform for Acceleration and Inclusion (TRAIN), self-employed and mixed-income earners shall also be liable for income tax.
- Business Tax. There are two different kinds of business taxes in the Philippines, the Percentage Tax and Value-Added Tax (VAT). Influencers will be taxed according to their gross annual income.
Allowable Tax Deductions for Influencers
Generally, influencers in the Philippines are considered self-employed individuals, allowing them to deduct or exclude certain expenses from their income to lower their overall taxable income. NIRC states that individuals earning from business income can opt for itemized deductions or optional standard deductions to reduce tax liability.
RMC 97-2021 lists several examples on which expenses can be deductible from their taxable income under itemized deductions:
- Filming expenses such as cameras, smartphones, microphones, and other filming equipment
- Computer equipment
- Subscription and software licensing fees (Adobe Premiere, Adobe Photoshop, etc.)
- Internet and communication expenses
- Home office expenses
- Office supplies
- Business expenses such as travel or transportation costs related to YouTube business payment to an independent contractor or company for video editing, costume designer, advertising, and marketing costs
- Depreciation expense
- Bank charges and shipping fees
Optional Standard Deductions
Influencers may also opt for Optional Standard Deductions, declaring 40% of their total income to be dedicated to business expenses. This option may benefit influencers whose expenses are less than 40%, reducing your income tax liability. However, once you have availed for this option, it is irrevocable for the rest of the taxable year.
Double Taxation for Influencers Earning Outside of the Philippines
Under RMC 97-2021, BIR cited that influencers earning income from sources outside the Philippines may exempt themselves from incurring double taxations. Double Taxation is where you pay taxes twice on the same source of income.
Assuming that the country has a tax treaty with the Philippines (i.e., United States of America), influencers can apply for a Tax Residency Certificate (TRC) from the BIR International Tax Affairs Division (ITAD). This allows you to claim tax benefits such as tax credits, exempting you from incurring double taxations. However, keep in mind that the benefits can differ depending on the country of origin from where your income is derived.
How to Register as an Influencer with the BIR
Due to recent laws, BIR now requires all social media influencers and online content creators to undergo business registration and are obliged to register, file, and pay taxes. Generally, the BIR registration process for influencers and self-employed individuals are as follows:
- Accomplish BIR Form 1901 and submit the same with the appropriate supporting documents to the Revenue District Office (RDO) of your business location. Listed below are the supporting documents required for registration:
- DTI Certificate of Registration (if applicable)
- Government-issued identification (Passport, Driver’s License, Birth Certificate, etc.)
- Sample of BIR Printed Receipt/Invoice or Samples of Principal Receipts.
- For Principal Receipts:
- Such must be printed with BIR-accredited Printers. You must also accomplish BIR Form 1906, also known as the Authority to Print (ATP) Form*.
- For Principal Receipts:
- Other relevant documents such as books of accounts, Cedula and Professional Tax Receipts (PTR), and screenshots of website/channel, if applicable.
- Pay the registration fee of ₱500 and ₱30 for the loose Documentary Stamp Tax (DST) or Proof of Payment for the Annual Registration Fee (ARF). You may also pay the fees to the corresponding AABs of the RDO.
- Submit a photocopy of your BIR form payments and other documentary requirements to your RDO.
*Securing official receipts can be done at BIR’s business registration without the need for securing an ATP. However, these will only be for a limited number of booklets. If the applicant foresees lucrative income from the practice of this profession, it is recommended that they secure an ATP first.
Secure A Hassle-Free Registration Process with BIR
As online entrepreneurs, it is imperative to ensure that you abide by the latest tax and corporate laws to avoid incurring unwanted penalties and fees from the government. Making sure that you register with appropriate government agencies opens you to numerous business opportunities.
If you find these procedures exhaustive, it is best to reach out to business consulting firms to guide you through the step-by-step process of registering as a self-employed individual in the Philippines.