Taxation for Philippine Social Media Influencers

Whenever my content creator friends and social media influencers would ask me when is it the best time to pay taxes, I would always tell them that once you are earning, you have to pay. And this is not because I want to be some goody two shoes in this industry, but personally, what I value most is peace of mind. So today, let’s go through this RMC about Taxation for Social Media Influencers.

Believe me! I had my fair share of missed tax filings and books that were not updated years ago, and it was not a fun thing to go through. I had to pay exorbitant fees, but I couldn’t blame anybody else. Paying taxes is the responsibility of the tax payer, so I couldn’t blame my accountant or blame the BIR for charging me. Having no knowledge of the law is not an excuse, so we all better brush up on learning about taxes.

Why are we discussing this? Yesterday, our tax ministry, the BIR, released a Revenue Memorandum Circular (RMC) or a memo reminding everyone that all Social Media Influencers to file and pay their taxes. This is RMC97-2021. Some of you would ask “who are Social Media Influencers”? So the BIR actually gave a run down of who these people are and they specifically mentioned those who are under the YouTube Partner Program or basically people who are earning from Youtube.

But, if you earn via direct advertising, meaning you get paid by brands, or you earn via other platforms like Facebook (via support badges, stars, etc.), Twitch (via bits and subs), Kumu (via in app gifts, etc.), Instagram, even Affiliate commissions, please please please do pay taxes for these things, well. The law states that if you earn any income on Philippine soil, you will have to declare taxes for these earnings.

So how do you begin?

I wrote a blog post before where I explained how you can start paying taxes as a freelancer: A FREELANCER’S AND CONSULTANT’S GUIDE TO USING TAXUMO

Feel free to go through this post.

In the RMC, BIR also goes through the allowable deductions or basically, what are the expenses that you can declare. It also goes through compliance from registration, to updating your books and filing and paying taxes (which I discussed in the shared linked above for Freelancers).

The BIR goes on to remind the penalties for tax evasion and failure to file a return.

Penalties for Online and Social Media Influencers who evade taxes and who fail to file their taxes

After that, the BIR discusses double taxation. Double taxation is basically being taxed by the platforms that you use and being taxed as a professional. An example for this is that Google LLC withholds 24% of your earnings. Then when you declared in the Philippines as a tax payer, you will have to pay VAT/Percentage, Income tax and (if applicable) withheld taxes.

To avoid double taxation, one must secure a tax residency certificate (TRC) from the BIR and then this is submitted to the foreign platform who is applying taxes in their own countries. Note that this is only applicable to platforms and entities in countries that the Philippines has a tax treaty with.

What happens to your taxes in that foreign country? In the case of Google LLC, the previously withheld 24% will now become 15% and then you still have to pay taxes in the Philippines. Of course, for other platforms, they will have yet to share what their own taxes are.

So with the reminder yesterday, the last section of the RMC states this…

So there you have it. If you have questions or you need assistance, feel free to chat with Taxumo via the chat button on their site: https://www.taxumo.com or email them your inquiries customercare@taxumo.com.

Tax 101: What Every First Timer Should Know

Doing your taxes is probably one of the most frustrating things every working person does. Even the more veteran people, when it comes to taxes, would find it hard to do when they don’t prepare for it well. In the Philippines, tax computations are one of the things that a lot of people fear, just because of how stressful it can get.

That being said sooner or later, everyone will have to do their taxes as part of their lives. And for those first timers that have no idea how to do them yet, don’t fret, because if you start out early, you might find it easier to do in the future! Plus keep in mind that there are a lot of helpful websites and applications that make it easier for you to do your taxes! That being said, here are some of the most important things that every first-time taxpayer should know.

BIR Forms

There are many kinds of BIR forms that are dedicated solely to paying business taxes. For example, there are specifics forms applicable for self-employed individuals, employees of companies, and business owners. And there are forms that are to be used by Partnerships and Corporations.

It’s important that you know which one you should use so that you can fill out the right form and avoid penalties. Freelancers fall under self-employed individuals. We, freelancers, are considered non-licensed professionals. They, along with business owners who are sole proprietors usually do their own taxes. While people that are employed would usually have their companies do their taxes for them.

Documents Needed

There are as many steps to the processes as there are BIR forms. Haha! I may be exaggerating, but the what’s for sure is that the steps to be taken take a whole lot of time from a business owner’s day. On the average, a business owner in the Philippines takes 2 days in a month (according to a PWC and World Bank report on taxes) spent just complying with taxes. When starting a business, I highly recommend that one should at least be familiar with the 101s of preparing and submitting your own taxes.

A good example would be to know more about income tax returns. These are forms that need to be submitted as long as you are making some kind of income or receiving compensation. Income is basically your gross revenue less expenses and when you do this, you get your taxable income. This is the basis for your taxes (income tax return). A self employed individual submits and pays for income taxes every quarter (Form 1701Q), the fourth quarter being the “famous” annual income tax (Form 1701 or 1701A).

If you are employed (have a day job) and running a business at the same time, you are considered to be a mixed income earner. How do you report taxes? You will secure BIR Form 2316 from your employer at the end of the year and use the values there and combine it with the income / expenses from your business. You do this only for form 1701 or Annual income tax form.

If you need help in preparing tax form 1701 and 1701A, feel free to check out https://www.taxumo.com and check out their blog. They have useful information for everyone!

Payments

The final step is to print out all of these documents and pay for it at the Authorized Agent Bank (basically a bank that accepts BIR payments in the city of your business).

Please prepare 3 copies for all of your accomplished BIR Forms along with the required deposit / bills payment slip and your payment.

In some cases, you won’t be needing to pay anything, and that would entail a “No Payment” Situation. These include refundable/ creditable tax returns, returns with excess tax credit carry over, and returns that are qualified for a second instalment. These “no payment” transactions just need to be filed and stored together with the BIR confirmation via the eBIR Forms system.

Key Takeaway

This article detailed the very basics of what you need to know about taxes. In the Philippines. Tax computations are frustrating, however, as long as you prepare everything and do it as early as you can, you won’t have a problem with doing your taxes any time soon.

If you need help with understanding all of these still, just ask Taxumo.

P.S. I’m a co-founder of Taxumo, whose mission is to help people start and sustain a business! 🙂 Feel free to contact us!