When BIR clicks ‘like’ and ‘subscribe’

“Click like and subscribe” is a common catchphrase used by social media influencers to entice viewers to subscribe to their YouTube channels. By doing so, viewers will be able to see and watch the influencers’ content more frequently.

YouTube is the predominant platform by which social media influencers earn money. Social media influencers put up their channels to qualify them to join the YouTube Partner Program. Once they are eligible as a YouTube Partner, social media influencers can earn income from the advertisements placed in their videos.

Aside from the YouTube Partner Program, social media influencers earn by becoming a member of an affiliate program of a company and placing affiliate links on their YouTube videos. Once a subscriber or any viewer clicks on the affiliate link, he/she will be directed to merchandise or services being sold thru another online platform. If the subscriber buys the merchandise through that link, the social media influencer earns a commission.

However, it is not only from YouTube from which a social media influencer can earn revenue. Social media influencers also have other social media platforms, such as Facebook and Instagram. Usually, their YouTube subscribers are also their followers on their other social media platforms. On these platforms, social media influencers can earn revenue by directly sponsoring any merchandise. They can post a picture with the merchandise and testify to the effectiveness of the said product. They can also put a video in their YouTube channel for direct sponsorship. Aside from these, social media influencers also earn revenue by selling their own merchandise on their social media platforms or even get donations from their followers.

Under these circumstances, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) 97-2021 on Aug 16. The RMC defines all social media influencers as “all taxpayers, individuals or corporations, receiving income, in cash or kind, from any social media site and platform (YouTube, Facebook, Instagram, Twitter, TikTok, Reddit, Snapchat, others) 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.”

RMC 97-2021 also classified the various sources of a social media influencer’s income as follows: 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 or e-books, and podcasts and webinar. RMC 97-2021 also made it clear that, to constitute gains or profits from the conduct of trade or business, payments must be received by a social media influencer in consideration of the services rendered or to be rendered, irrespective of the manner or form of payment.

RMC 97-2021 also states the different business expenses which a social media influencer can claim as deductions from its income tax such as: filming expenses; computer equipment; subscription and software licensing fee; internet and communication expenses; home office expenses; office supplies; business expenses, depreciation expenses and bank charging and shipping fees.

Upon the issuance of RMC 97-2021, there was a loud outcry from the public, which perceived the said RMC as another sign of the BIR’s way of increasing the government’s coffers to the detriment of the said social media influencers. A YouTube channel owned by social media influencers was allegedly voluntarily shut down as a result of the said RMC. Social media sites were filled with endless debate on said RMC, circling on the issue of whether the BIR was overreaching or simply applying the law when it issued the RMC.

A reading of the other sections of RMC 97-2021 reveals that the issuance is merely a reiteration of what is already contained in the Tax Code and other BIR issuances. Under Section 4 of the said RMC, it states that social media influencers are liable for income tax and percentage tax or Value-Added Tax (VAT) based on Sections 23, 24, 27, 28, 105, 106, 109 and 116 of the Tax Code. A comparison of section 4 of the said RMC and the above sections of the Tax Code would reveal that Section 4 is merely lifted from the said Sections of the Tax Code. The same is true of Section 5 of RMC 97-2021, which uses Section 34 of the Tax Code as the basis for the allowable deductions for social media influencers. The same observation can also be applied to Section 6 of the said RMC, which reiterates the contents of Sections 236, 232, 248, 254, and 255 of the Tax Code regarding tax compliance. Section 6 also mentioned Revenue Regulations 07-2012 for instructions on obtaining the Tax Identification Number (TIN).

Even other sections of RMC 97-2021 merely reiterated the rules and Tax Code provisions on double taxation, tax residency certificate, and effect of taxes withheld in foreign countries.

All in all, RMC 97-2021 is merely a reiteration of the Tax Code and BIR issuances that every taxpayer must follow when receiving income. RMC 97-2021 comes across as a summary of the basic Tax Code provisions, which every taxpayer should know. The only new additions to the RMC are the provisions unique to the circumstances of the social media influencers, such as the sources of income, allowable deductions, and, in the case of YouTube channel owners, the tax treatment of payments from the YouTube Partner Program.

When social media influencers ask everyone to click and subscribe to their YouTube channels, they should understand that everyone includes even the BIR. Social media influencers must be reminded of their responsibilities towards their followers and their country.

Lynn Margarita O. Palis is a supervisor from the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email [email protected].