Never have I ever is a game in which players take turns in asking other players about certain things or actions that they have never done yet. Any player who has done an action will do a consequence. This real-world game has been brought to the digital sphere by content creators and has been a staple in different social media platforms as a source of light and funny contents. But in recent months, these content creators as well as other social media personalities, seem to be in a never-have-I-ever situation with the Bureau of Internal Revenue (BIR), but with consequences that are real and may even be costly.
In August of this year, the BIR issued Revenue Memorandum (RMC) No. 97-2021. The issuance was perceived by some as an initiative of the BIR to increase its collection at the expense of a targeted sector, as well as an intentionally timed distraction during a period when the Commission on Audit has found that the Department of Health failed to comply with the government standards in the handling of around Php67B of public funds.
Let us take a closer look at RMC 97-2021 and how it will impact the lives of Social Media Influencers:
The circular was issued by the BIR to clarify the tax obligations of all Social Media Influencers, individual or corporation, with the end goal of raising revenues from their undeclared income.
Under the circular, the term Social Media Influencers includes all taxpayers, individuals or corporations, receiving income, in cash or in kind, from any social media sites and platforms (e.g., 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 performed on such social media sites and platforms.
In addition to the definition of Social Media Influencers, other salient provisions of the circular are summarized below.
For tax purposes, influencers can be corporations, partnerships, self-employed individuals or sole proprietors and are generally subject to income tax and business tax.
Taxable income include revenue from YouTube Partner Program; sponsored social and blog posts; display advertising; becoming a brand representative/ambassador; affiliate marketing; co-creating product lines; promoting own products; photo and video sales; digital courses subscriptions, e-books and podcasts and webinars.
For income tax, under the graduated income tax rates, the taxable income can be reduced by either the Itemized Deductions or the Optional Standard Deduction. The allowable Itemized Deductions include but are not limited to filming expenses; computer equipment; subscription and software licensing fees; internet and communication expenses; home office expenses; office supplies; business expenses; depreciation expense; and bank charges and shipping fees.
Self-employed individuals with revenues of not more than Php3,000,000, i.e,, Value Added Tax (VAT)threshold, can opt to be taxed at 8% of gross sales or revenue and shall no longer be subject to the 1% percentage tax.
For business tax, the taxable income can either be subject to the 1% percentage tax or to the 12% VAT, unless the self-employed individual chose to be subject to the 8% Gross Income Tax.
A failure to file any of the required return, supply correct and accurate information, pay tax, withhold and remit tax and refund excess taxes withheld on compensation can result to a fine of not less than Php10,000 and imprisonment of not less than one year but not more than 10 years.
Any attempt to evade or defeat tax can result to a fine of not less than Php500,000 but not more than Php10 million and imprisonment of not less than 6 years but not more than 10 years.
Influencers are required to withhold taxes (creditable, compensation and/or final), if applicable.
Influencers are required to be registered or to update their BIR registrations, keep books of accounts and file tax returns and/or pay the taxes due on these returns.
On the other hand, the Tax Code of 1997, as amended, provides the following:
Any person, required under the Tax Code, as amended, to file a return, statement or other documents, shall be supplied with a Tax Identification Number for his proper identification for tax purposes [Sec. 236(J)]
Any registered taxpayer shall, update his registration information with the Revenue District Office where he is registered, specifying therein any change in tax type and other taxpayer details [(Sec. 236 (E)]
A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines [Section 23(A)]
A nonresident citizen is taxable only on income derived from sources within the Philippines [Section 23(B)]
Any person or entity who, sells, barters, exchanges, leases goods or properties and renders services (gross sales or receipts exceed Php3,000,000) shall be subject to VAT [Sec. 105]
Any person whose sales or receipts are exempt from the payment of VAT and who is not a VAT-registered person shall pay a tax equivalent to 1% of his gross quarterly sales or receipts [Sec. 106]
All corporations, persons, partnerships required by law to pay internal revenue taxes shall keep and use relevant and appropriate set of bookkeeping records duly authorized by the Secretary of Finance [Sec. 232 (A)]
Although not included in the circular, the Tax Code, as amended, also provides that all persons subject to taxes shall, at the point of each sale and transfer of merchandise or for services rendered valued at Php100 or more, shall issue duly registered receipts or sales or commercial invoices [Sec. 237(A)].
Based on the foregoing, the circular did not provide any new tax nor expanded the scope of any existing tax as the provisions included in the same were already included in the Tax Code. As it is, similar to the BIR issuance on online selling (RMC No. 60-2020), this new circular (RMC No. 97-2021) is another reminder that:
any inflow of wealth will generally result to an outflow of tax regardless of whether such wealth was derived in the digital or the real world.
Unfortunately, the perceived intentions and the suspicion on the timing of the issuance may continue to linger as these will likely always remain in the realm of speculation.
With the digital transformation touching almost all aspects of our lives, it can be expected that the BIR will continue to exert efforts – including, among others, clarifying the taxation of certain sectors and/or activities – to keep up with the shifts and changes in the current business environment. Consequently, taxpayers should ensure that tax and other regulatory compliance requirements are always considered in any attempt to explore certain opportunities or to adapt to certain changes in the same business environment.
In the case of Social Media Influencers, with the guidance of the RMC No. 97-2021, they can already perform the necessary actions to ensure that they will be ready to say to the BIR that Never have I ever --- Not Pay Tax.
If you need assistance in your registration or compliance, contact us.
Disclaimer: Numbers that Matter Inc. aims to curate topics that are simplified and easily digestible for micro, small and medium enterprises, by balancing our technical know-hows as accounting professionals and the practical experiences of our team working on ground with our clients. There may be technicalities intentionally omitted from our content to preserve its simplicity. Any practical tip is purely the opinion of the team and is merely informal advice, and thus, should not be taken as a definitive rule. Should you have any specific questions, feel free to message the team at firstname.lastname@example.org and we’d be happy to discuss with you further.