Recent tech and online platforms have allowed for the creation of many new jobs. One of these esteemed jobs is being a “social media influencer.” Influencers endorse sponsored brands and make profits over paid partnerships, sponsorships, advertisement, and affiliate links. In addition, they help other brands build their image by promoting products and services.
Being a social media influencer is a rewarding job because you grow your followers and live up to the job title by influencing people. Moreover, you play a big part in helping businesses market themselves and grow. It is also a great way to earn income without being reliant on a boss. However, one common misconception is that all profits from being an influencer run tax-free. If you are an influencer or are just getting started, it is essential to note that you still have tax obligations.
In fact, the Bureau of Internal Revenue (BIR) has recently cracked down on all influencers who have not paid taxes. The BIR mandates that all social media influencers pay their tax obligations. Any failure to do so may result in the payment of hefty fines, penalties, and tax evasion charges. To learn more, about this topic, continue to read on.
Why are influences required to pay taxes?
Like any other individual who makes an income, influencers are not exempt from paying taxes. What they do can be seen as rendering services and are thereby paid compensation. In the Philippines, the Supreme Court notes that ‘income’ means any ‘inflow of wealth’ generated using capital. Additionally, royalties that are received as a means of compensation are subject to a final tax of twenty percent.
How are influencers classified?
To start paying your tax obligations, it is important to know what kind of taxpayer you are, as this would come with the corresponding tax obligations. For example, if you are an influencer, you may register as self-employed, or you may set up a sole proprietorship business where all your transactions will be coursed through.
How much will you be taxed as an influencer?
As influencers may be taxed as a self-employed person or sole proprietor of a business, they are taxed just like any other freelancer, self-employed, or sole proprietor individual. Tax rates will depend on the total declared income.
For income of individuals earning purely compensation and engaged in business:
P0 – P 250,000 – 0% taxes
P 250,001 – P400,000 – 20% of any excess over P 250,000
P 400,001 – P800,000 – P 30,000 and 25% of any excess over P 400,000
P 800,001 – P2,000,000 – P 130,00 and 30% of amount exceeding P 800,000
P2,000,001 – P8,000,000 – P 490,000 and 32% of amount exceeding P2,000,000
P8,000,000 or more – P 2,4100,000 and 35% of amount exceeding P8,000,000
For freelancers registered as self-employed whose income does not exceed P3,000,000 (the VAT threshold) annually:
There exists an option to pay eight percent (8%) Income Tax on Gross Receipts that exceed P250,000 instead of the Graduated Income Tax rates stipulated above or the graduated tax rates.
Noteworthy, individuals earning less than two hundred fifty-thousand pesos annually pay zero in taxes. However, they are still not exempt from business registration and filing an income declaration as it is necessary for the purpose of documentation on the part of the BIR. As an influencer, you are required to comply with these rules.
What are the benefits?
For one thing, the BIR will not go after you if you register properly and file the correct paperwork. However, any failure to pay obligations and register yourself as a taxpayer if you are earning an income can cause the BIR to probe into your means of earning. This is inescapable, especially in the case of social media influencers, as transactions cannot be easily refuted when they are posted online for all to see.
More importantly, by paying your dues, you can contribute to society. Taxes may seem like a burden as they are deducted from income, but taxes are what’s used to fund things like roads and other projects that may benefit you. Taxes also fund public health projects, educations programs, and so many more.
What if I need help?
If you are still confused as to the taxes an influencer needs to pay or need assistance when it comes to registering with the BIR, or just need extra help with managing your accounting and bookkeeping, do not hesitate to contact professional accountants.
Remember that only with proper accounting and transaction-recording methods will you be able to duly comply with tax requirements. Accountants are well-versed in this and will be of great help.
Additionally, if an in-house accountant costs too much for you at the moment, you may always avail of online outsourced accounting services that are more affordable but equally reliable. Call our team of CPAs for guidance and take advantage of our free 30-minute consultation.