Tax Articles

Youtuber not Youtube

By Atty. Irwin C. Nidea Jr.

There are many popular apps that changed the landscape of media as we know it. These platforms are used by celebrities and ordinary citizens to deliver interesting and wide array of entertainment contents. The number of likes and engagements are measured by these social media sites and the creators also known as social media influencers are rewarded with substantial compensation.

The Bureau of Internal Revenue (BIR) is aware that these social media influencers are earning a lot as many of them naively flaunt their earnings in their own social media account. In RMC 97-2021, the tax man is now after bloggers and video bloggers who derive income from the following sources, among others: 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, and e-books, podcasts and webinars.

This is just fair since ordinary working Filipinos are required to register and pay tax. Social media influencers are also required to withhold creditable/expanded withholding tax, final taxes, or other withholding taxes and remit the same to the BIR as well as issue the necessary Certificates of Tax Withheld, and failure to comply would mean corresponding penalties and criminal liability.

It is not the first time that the BIR has targeted this new economy. Through the years, the BIR has issued circulars to address the different players of the digital economy.

In 2013, the BIR issued RMC No. 55-2013 subjecting to tax online business transactions such as online shopping or retailing, online intermediary service, online advertisement and online auction. These online entities, treated similarly with any other brick-and-mortar businesses, are required to be BIR-registered, obtain and issue invoices and receipts, and most importantly, be subject to the corresponding taxes such as income tax on its earnings, withholding taxes, and VAT or percentage tax, among others.

In 2015, the BIR, through RMC 70-2015, required transport network companies (TNCs) and their partners (i.e., owner or driver of vehicle) to likewise register with the BIR, secure and issue registered official receipts and be subject to income and business taxes.

The BIR also issued RMC 60-2020 reminding persons conducting business through any forms of electronic media to pay taxes and register their business with the BIR. It covers individuals and non-individuals who are partner sellers/merchants, payment gateways, delivery channels, internet service providers and other facilitators. The RMC did not specify whether it seeks to cover both residents and non-resident individuals or corporations. But as can be gleaned from the RMC’s registration guidelines and requirements, (i.e., Birth Certificate and Department of Trade and Industry registration for Individuals, and SEC Certificate of Registration and Articles of Incorporation/Partnership for Non-individuals), the said documents would seem to apply to resident entities only.

The House of Representatives on the other hand introduced bills to amend the country’s VAT law by clarifying that all goods, “including electronic in nature”, and all kinds of services, “whether rendered electronically or otherwise”, shall be subject to 12% VAT. The bills also added to the current VAT coverage the supply by any resident or non-resident person of digital advertising services, subscription-based services and digital services (i.e., google, facebook, amazon, youtube, among others).

There is however no specific provision on the House bills amending the current provisions on income tax, except on withholding tax for individual members of network orchestrators. The requirement for the non-residents to establish a representative office or agent in the Philippines has been scrapped since the country has treaty obligations, specifically on the creation of a permanent establishment before Philippine income tax may attach. This is the hurdle why the latest House Bill is just imposing VAT and not income tax on digital transactions.

It appears that currently, the BIR can only capture Philippine residents that are engaged in the digital economy. Philippine online platforms, online sellers and social media influencers must rightfully be subjected to tax. But the real revenue can be derived by the government from the online platforms by which the online sellers and social media influencers conduct their business. Unfortunately, it seems that they are out of reach by our current laws mainly because they are registered in a foreign country.

I hope the discourse surrounding the issue of taxing the foreign online platforms will gain traction once again. The target should not only be Philippine residents. Our country must be given its fair share of the income that these foreign registered platforms derive from us.