14 Sep 2021, 15:42 — 17 min read
If you are running any form of business for a commercial purpose (i.e. engaged in trade or business) in the Philippines, you must consider your BIR tax compliance obligations at all times.
Social media influencers are no different – a point recently reiterated by the BIR. In its most recent Revenue Memorandum Circular, the Philippine tax authority outlined and clarified the specific tax obligations of social media influencers in the Philippines, particularly when earning income directly from social media platforms (YouTube, Instagram, etc).
In PART 1 of this article, we look at the various tax compliance obligations that arise for companies in the Philippines when engaging an influencer for their social media and marketing campaigns.
In PART 2, we review the BIR’s most recent Memorandum and identify the key compliance takeaways that social media influencers must consider themselves when running their own business!
First off – a Question. What is a “social media influencer” from the perspective of tax and compliance in the Philippines?
The BIR has now actually provided a definition for the term “social media influencer” under their recently issued Revenue Memorandum Circular.
For the purposes of Revenue Memorandum Circular No. 97-2021, the BIR defines a “social media influencer” as including:
Social media influencers, in the Philippines and across the world, have become a valuable part of many advertising and marketing campaigns run by companies, brands and agencies.
Within RMC No. 97-2021, the BIR includes a short background on the business of social media influencers and social media influencer marketing in order to provide some context on the industry and for their new Memorandum.
Below is a short summary of the key items identified within the BIR’s background narrative:
It is therefore quite clear why the BIR has a specific interest in the business of social media influencer marketing. It is a service from which many companies in the Philippines benefit greatly and it is a service that many influencers provide as their core business offering.
As such, there will often be commercial transactions involved giving rise to tax obligations for all relevant parties!
Social media influencers can and do generate income in a variety of ways.
The sources of income generation may be across both offline and online channels for the influencer – including both traditional marketing platforms and more modern marketing and branding campaigns.
The BIR lists a number of sources for revenue generation, including:
As mentioned above, we look first examine the tax obligations that arise from the perspective of PH companies when they engage a social media influencer.
In Part 2 of this article, we look at the specific tax obligations of social media influencers themselves as provided for under RMC No. 97-2021.
Below are just two of the more common ways by which social media influencers might generate income:
For this next section, we are more concerned with No. 1 above – when a company engages an influencer to promote their brand. In particular, we are concerned with the tax and compliance obligations that arise from such engagements!
There are two primary ways in which a Company might engage the services of a social media influencer, as outlined below. We will use the term Company, with a capital “C”, to identify the ultimate client or brand that wishes to benefit from an influencer’s services.
No. 1 – Engaging A Social Media Influencer Directly
Engaging a social media influencer directly means that the Company will contract directly with the influencer and the financial transaction will be between the Company and the influencer.
In short, the Company will directly negotiate with and pay the influencer to provide a marketing, branding or advertising service for that Company.
No. 2 – Engaging a Social Media Influencer via an Agency
Engaging a social media influencer via an advertising, marketing, branding or talent agency is slightly different.
In this case, the Company will actually contract directly with the agency for the services it requires. The agency will then contract (or sub-contract) directly with the influencer. This means that there will be two financial transactions – one between the Company and the agency and the second, between the agency and the influencer.
Whether a Company chooses to engage an influencer directly or via an agency, there are number of key items that the Company must consider from the perspective of Philippine tax and compliance requirements.
Below are just 4 of these key items:
As mentioned above, the BIR recently released Revenue Memorandum Circular No. 97-2021 which sought to clarify the specific tax and compliance obligations of social media influencers in the Philippines.
The BIR included quite a comprehensive background on the growth of social media marketing and the important role of social media influencers in marketing and advertising campaigns – as outlined at the start of this article (see above).
The BIR also provided quite specific reasons for why they decided to issue this RMC!
First of all, the BIR noted that it had come to their attention that some social media influencers a) are not registered with the BIR and are therefore not submitting income taxes or b) are registered with the BIR under different lines of businesses or different corporate entities but are not declaring their earnings from their social media marketing activities.
Secondly, the BIR has received reports that some social media influencers in the Philippines are not declaring taxes on income that they receive from social media platforms in respect of the work they perform on these platforms.
In light of all of the above, the BIR now considers it an “opportune time to discuss the tax obligations” of social media influencers in the Philippines.
To keep it as short and straightforward as possible, we have briefly summarized below our 10 key takeaways from RMC No. 97-2021.
However, for a more detailed explanation on each takeaway, you can check out the BIR’s website to view RMC No. 97-2021.
10 Key Takeaways from RMC No. 97-2021
In summary, RMC No. 97-2021 is a very helpful resource for social media influencers in the Philippines to review and help understand their specific tax and compliance obligations when dealing with either their clients or generating revenue from social media platforms.
The CloudCfo Team works with many companies, agencies and brands in the Philippines who engage creatives, artists and influencers as part of their business model or for the purposes of marketing and branding campaigns.
Our Team of expert accountants and bookkeepers has significant experience advising on the various compliance obligations, processes and controls that PH businesses must consider when working with such business models.
If you manage or operate a company that regularly works with creatives, influencers or freelancers, Contact the CloudCfo Team today and let’s discuss how we can support your startup or SME’s tax and compliance requirements here in the Philippines!
Image source: Shutterstock
DISCLAIMER: This article is strictly for general information purposes only. Nothing in this article constitutes or intends to constitute financial, accounting, regulatory or legal advice and must not be used as a substitute for professional advice. It is still necessary to consult your relevant professional adviser regarding any specific matter referenced above. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.
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