RMC No. 97-2021: Clarifies the taxation of any income received by social media influencers

Key points

1. Who is taxed and on what. Influencers other than corporations and partnerships are self-employed individuals or sole proprietors, so their income is generally business income, liable to Income Tax and Percentage Tax or VAT. Income sources include the YouTube Partner Program, sponsored posts, display advertising, affiliate marketing, brand ambassadorship, digital courses and podcasts, and the fair market value of free products received for promotion must be declared as income.
2. Income tax rates. Income tax follows the schedular rates under Section 24(A)(2)(a) of the NIRC or the corporate rates under Sections 27 and 28, depending on the taxpayer. For resident aliens, income from Philippine-based contents is generally taxable, and the burden of proving otherwise is on the resident alien.
3. Business tax and 8% option. Self-employed individuals whose gross sales or receipts and other non-operating income do not exceed the VAT threshold of ₱ 3,000,000.00 may opt for 8% on the amount over Two Hundred Fifty Thousand Pesos (₱ 250,000), in lieu of graduated rates and Percentage Tax under Section 116. Mixed income earners may use the 8% option on business income within the same threshold, and above it the graduated rates and VAT apply.
4. Deductions. Itemized deductions under Section 34 must be directly and exclusively related to the income and substantiated, for example with BIR-registered receipts and invoices. Examples for YouTubers include filming and computer equipment, subscriptions, internet, home office expenses, depreciation, bank charges and shipping fees, and the taxpayer may instead elect the Optional Standard Deduction of not more than forty percent (40%) of gross sales or receipts, or of gross income for corporations.
5. Compliance and penalties. Influencers register with the BIR, keep books of accounts, file returns and pay taxes, and withhold and remit tax if applicable, as set out in Section 6 of the Circular. Willful evasion or failure to file or pay brings criminal liability under Sections 254 and 255 in relation to Section 248(B), and under-declaration or overstated deductions exceeding 30% are prima facie evidence of a false or fraudulent return, with a civil penalty of fifty percent (50%).
6. Foreign income and treaty benefits. Income treated as royalties in another country, including YouTube Partner Program payments, is included in gross income. An influencer paid by a nonresident from a treaty country informs the payor of Philippine residency, gets a Tax Residency Certificate from the International Tax Affairs Division (ITAD) if proof is required, and applies for Mutual Agreement Procedure (MAP) if wrongly denied treaty benefits. Foreign tax credits under Section 34(C) are capped, and an influencer who did not invoke treaty benefits cannot claim credit above the treaty amount.

Who is affected

• Social media influencers, individual or corporation
• Mixed income earners
• Resident aliens earning from Philippine-based content

Deadlines and effectivity

• YouTube payments treated as royalties starting June 1, 2021