Top-earning influencers face BIR audit

THE Bureau of Internal Revenue (BIR) is set to investigate 250 top-earning social media influencers for tax compliance, as the government tries to address revenue leakage.

The Department of Finance (DoF) on Thursday said the BIR had issued letters of authority to 250 influencers that are considered as the “top earners” in the industry, following the release of Revenue Memorandum Circular (RMC) No. 97-2021 on Aug. 16. that compelled them to register and pay taxes.

Once the letter of authority is issued, a revenue officer can begin its audit of the taxpayer’s accounts.

“We encourage them to register, and then we have the profiling of over 250 personalities. We will do the investigation so that they would pay the necessary corresponding tax on their earnings,” BIR Deputy Commissioner Arnel SD. Guballa said in the statement.

Mr. Guballa said in a separate Viber message the agency could not disclose the names of the influencers to be investigated due to privacy issues.

Influencers are those who generate income, whether in cash or kind, from their posts on various digital media platforms like YouTube, Facebook, Instagram and Tiktok. The BIR considers them as self-employed individuals or persons engaged in business as sole proprietors.

In RMC 97-2021, the BIR said influencers should pay income and business taxes, whether in the form of percentage tax or value-added tax, depending on the nature of their earnings.

Influencers should declare their earnings from YouTube’s Partner Program, sponsored social and blog posts, advertising, brand sponsorships, affiliate marketing, co-creation of products, photo and video sales, digital subscriptions, e-books, podcasts and webinars.

The BIR said influencers should also declare as income the fair market value of free goods they receive in exchange for promotions.

Earnings generated via royalties from foreign countries, like payments under the YouTube Partner Program, should also be included in the gross income of influencers and are subject to tax.

Given the existing tax treaties the Philippines has with other nations, the BIR said it has a “special power” of obtaining the needed information from foreign tax authorities and verify the income of influencers.

The BIR warned that those who deliberately evade taxes face criminal charges under the Tax Code.

To avoid double taxation, influencers should also inform the countries where they generate their income, that they are residents of the Philippines to avail themselves of the tax treaty benefits, if applicable.

“The BIR may safely rely on the data provided by its treaty partners to establish the influencer’s tax liability,” according to the circular.

“The social media influencers are, therefore, advised to voluntary and truthfully declare their income and pay their corresponding taxes without waiting for a formal investigation to be conducted by the BIR to avoid being liable for tax evasion and for the civil penalty of 50% of the tax or of the deficiency tax,” it added.

BIR Deputy Commissioner Marissa O. Cabreros said in a Viber message claiming treaty benefits could lower the taxes to be paid by influencers. This means influencers should obtain a tax residency certificate.

The Creator and Influencer Council of the Philippines (CICP) said they have reminded members to comply with their tax obligations.

“We have also reached out to BIR to request for a dialogue on opportunities and initiatives that can simplify compliance. We are hopeful that our dialogue will take place soon for the benefit of all concerned stakeholders,” the group said.

The move of the BIR to audit influencers has been widely expected since it is part of its mandate, Maria Lourdes P. Lim, a managing partner at Isla Lipana & Co., PwC Philippines said in a mobile phone message.

“There is an audit process and in line with the due process requirement, the taxpayer is given the opportunity to present its side to refute the deficiency tax findings of the BIR. So the timing will depend on how quickly the BIR can complete its investigation and the response of the taxpayer — whether to agree or contest the findings,” Ms. Lim said.

The audit of influencers would also help the BIR raise more revenues, Raymond “Mon” A. Abrea, founding chairman and a senior tax advisor of the Asian Consulting Group, said in an e-mail.

“Definitely, there’s still lack of awareness among social media influencers and the public in general when it comes to tax compliance despite the efforts of the BIR to educate the public and improve the ease of paying taxes,” he said.

“The investigation will probably continue until BIR sees a significant increase of registration and tax compliance among social media influencers. However, given the amount of revenues generated from these digital platforms, they may be included in the annual priority program of BIR in their audit and investigation,” he added.