There is a notable increase in the number of online selling in the Philippines. This is evident during the nationwide community quarantine amid Covid-19 crisis. And with this, BIR has ordered that all online sellers must register their business and pay their corresponding taxes.
On Wednesday, June 10, 2020, the Bureau of Internal Revenue (BIR) announced that there is a mandate for online sellers and other digital-based business to register their business activities. They must also pay taxes by July 31, 2020. This is in accordance with the issuance of Revenue Memorandum Circular No. 60-2020 (RMC 60-2020) which dated June 1, 2020.
The circular entails that all Filipinos engaging in online business and other digital transactions in that manner must follow the TAX code. They must register their business and settle the corresponding amount of taxes. They must also declare previous sales or transactions. Online transactions also include digital services such as payment gateways, delivery channels, internet service providers, and other business facilitators.
The memorandum also covers that complying with registration and update of requirements must be done until July 31, 2020 to avoid penalty. Failure to comply on or before the deadline will be imposed with corresponding measures under the law including those who will be found to be doing business without complying with the registration.
This announcement from the BIR has earned positive and negative opinions including some uproars especially from small-time online business owners.
During a press briefing on June 11, 2020, Presidential Spokesperson Secretary Harry Roque Jr. explained that this step was implemented as it was necessary for the government to raise funds to battle the Covid-19 pandemic since funds are primarily collections from BIR and customs.
However, Sec. Roque also clarified that not all online businesses need to pay taxes. But registration is a must. Only those online sellers who are earning annually of more than P250 000 will be taxed. This is based on the Tax Reform for Acceleration and Inclusion (TRAIN) law.
Online businesses with net income of P250 000 or less per year are exempted. Acting Socioeconomic Planning Secretary Karl Chua confirmed this.
Once registered, all businesses will be required to comply with the following:
- Issuance of registered Sales Invoice or Official Receipt for every sale of goods or services to clients, customers, or buyers
- Keeping of registered Books of Accounts and other accounting records of business transactions
- Withholding of taxes, as applicable
- Filing of required tax returns
- Payments of correct taxes due on time
Source: Bureau of Internal Revenue
BIR Registration Guidelines
Online sellers can register through the Revenue District Office (RDO) with jurisdiction over the location of the business Head Office or over the place of residence of the individual taxpayer.
- Persons doing business online with no TIN yet- Register business following existing policies in securing TIN and registration of business.
- Persons doing business online who already have TINs but they have not registered their business
Whether TIN was issued due to ONETT or employment, they must register the business using BIR Form 1901. The RDO has full jurisdiction over place of business if it has a physical establishment. Otherwise, it will be the RDO having jurisdiction over the place of residence.
The concerned RDO shall affect the update of taxpayer classification (e.g. employee to sole proprietor, ONETT to sole proprietor); and include the business activity of online selling.
Update business registration, using BIR Form 1905, details to include additional business activity (online selling).
The Certificate of Registration (COR) shall be issued to those engaged in business upon compliance with requirements as follows:
|1. Fill up Registration Form||BIR Form No. 1901 (2 originals)||BIR Form No. 1903 (2 originals)|
|2. Present any government-issued ID that is readable and untampered||E.g. Birth Certificate, Passport, Driver’s License, etc.||As applicable: SEC Certificate of Incorporation; or SEC Certificate of Recording; or License to Do Business in the Philippines|
|3. Other documents required||DTI Certificate (if with business name)||Articles of Incorporation; or Articles of Partnership|
|4. Payments to the New Business Registrant Officer (NBRO) posted in the New Business Registrant Counter (NBRC)||Registration Fee (P500.00) and loose Documentary Stamp Tax for affixture to COR (P30.00)||Registration Fee (P500.00) and loose Documentary Stamp Tax for affixture to COR (P30.00)|
|5. Secure BIR Printed Receipts (BPR)/BIR Printed Invoices (BPI) or the Authority To Print (ATP)||(BPR/BPI- depending on the printing cost per RDO or ATP- own choice of printer from list of accredited printers||(BPR/BPI- depending on the printing cost per RDO or ATP- own choice of printer from list of accredited printers|
They are also looking into taxing other online transactions and online streaming services such as Netflix.
Prior to the declaration of RMC 60-2020, Department of Trade and Industry (DTI) has already warned that online entrepreneurs should display the prices of their goods. This to avoid asking the customers to send a private message. No more PMs for “hm”? 😊
After registering your online business, you might want to consider having a website. The most cost-effective way for a hassle-free and law-compliant online selling is to create an e-commerce store for your business. In this article, you will find out why a website is a must for your business.