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BIR Revenue Memorandum Circular 97-2021

Metro Manila (CNN Philippines, August 17) — With social media influencers being the subject of a much-talked about memorandum recently released by the Bureau of Internal Revenue, tax experts say the notice really isn’t something new.

“The RMC is really just to emphasize that social media influencers, like any person earning income, is subject to income tax and VAT,” Lea Roque, principal at the Tax Advisory and Compliance Division of Grant Thornton Philippines, told CNN Philippines on Tuesday.

The BIR issued Revenue Memorandum Circular 97-2021, seeking to clarify the taxation of any income received by social media influencers.

These include all taxpayers receiving income in cash or in kind from any social media site or platform “in exchange for services performed as bloggers, video bloggers (vloggers), or as an influencer, in general, and from any other activities.”

RMC 97-2021 states social media influencers must pay income tax and business tax, which may either be percentage or value added tax, and are classified for tax purposes as self-employed individuals.

For Asian Consulting Group chairman and chief executive officer Mon Abrea, the notice is “practically the same” as RMC 60-2020, which reiterated the tax obligations of online sellers and basically anyone earning income from all sources.

“General rule is if it’s not exempted or excluded, it’s included. Therefore, it’s taxable! So anybody earning income from all sources will be subject to income tax even if BIR doesn’t mention it,” the Philippine Tax Whiz told CNN Philippines.

The BIR noted in its memorandum that it had received reports about certain social media influencers not paying their income taxes despite raking in huge earnings from various platforms.

Other reports also said they aren’t registered, or are registered but under different tax types or line of business, and aren’t declaring their earnings.

Should small-time influencers be worried?

Perhaps one of the questions on everyone’s mind, especially those planning to start vlogging or just got into it, is whether the new memorandum will affect them.

Both tax experts said perhaps not just yet, especially if you’re just making ₱250,000 a year or below.

“Maybe not since it’s still exempted from income tax under the TRAIN law. But for those who are earning millions and even uploading house tours on their (Youtube) channel, I guess you’ve just earned the attention of BIR,” Abrea said.

Roque, also former president of the Tax Management Association of the Philippines, also reminded content creators to check if they qualify for exemption under the Barangay Micro Business Enterprise (BMBE) Law for income tax, on top of the TRAIN exemption which the RMC mentioned.

“It is possible to be exempt from income tax but still be subject to percentage tax,” said Roque, who emphasized the importance of knowing the rules and checking if they’re applicable.

What about social media influencers receiving income from overseas?

For influencers raking in income from foreign entities — including Youtube, Facebook, Instagram, and Tiktok — both Abrea and Roque stressed the importance of filing a tax residency certificate (TRC).

The TRC, according to the BIR memo, avoids the risk of double taxation – their foreign income won’t be taxed twice: in the foreign country, and again in the Philippines.

“The exemption is based on the provisions of the tax treaty with the country where the payor is a resident,” Roque said.

The RMC also provides an illustration of a Filipino social media influencer living in the country who received $200,000 or ₱10 million from American enterprise resident Google LLC in advertising revenues.

Google LLC owns social media giant Youtube.

What could still be improved?

As with all new government issuances, the taxation experts also raised concerns over the recent memorandum — and with it, their proposed solutions.

“The problem for most social media influencers is also the problem of most of our small businesses,” Roque said, noting some requirements may be too complex for someone who has no basic knowledge in bookkeeping or tax compliance.

Abrea, for his part, flagged the additional load it could cause.

“It’s not a new law so it’s still burdensome for some,” he said, emphasizing non-compliance is subject to a fine of up to ₱10 million, along with prison time of 10 years.

“That’s why I’m proposing 10% flat tax for small businesses including online sellers, influencers, and live streamers so they won’t be afraid and run away from BIR,” Abrea added.

Meanwhile, Roque suggested the further simplification of compliance requirements for both self-employed individuals and small enterprises – like designing a simpler record-keeping process that even those with up to a high school background could understand and fill up.

“We should calibrate the compliance requirements to make it easy for taxpayers to comply on their own without the need for them to hire external service providers,” she said.

Abrea also proposed aligning the country’s tax system with its E-Commerce Roadmap to encourage new forms of revenue generating activities across digital platforms.

This includes “digital tax that is not merely importing 12% VAT as being proposed in Congress, a higher tax exemption or 1-2 years tax holiday from registration to capture or encourage everyone earning income from various digital platforms,” he said.

Abrea also hopes a huge fund could be allocated for the BIR’s digital transformation so they can catch up with the advanced technology being utilized by digital firms.

The BIR eyes raking in ₱2.08 trillion in collections this year — up 6.7% from ₱1.95 in 2020 — as the government seeks more revenues to help usher in economic recovery amid the COVID-19 pandemic.

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