August 27, 2020
With strict lockdown measures imposed over Metro Manila and other areas of the Philippines, many Filipinos turned to online shopping and online selling. And the Bureau of Internal Revenue (BIR) has taken notice of this.
“We have observed that there is a sharp increase in online business transactions and when we observed that, we have to again remind the tax obligations of those who are into digital transactions,” said BIR Assistant Commissioner Elenita J. Quimosing, the guest speaker in DivinaLaw’s recently concluded webinar “Taxes for Online Sellers.” ACIR Quimosing clarified that the requirement for online businesses to register is not a newly imposed rule but is under Section 263 of the Tax Code of 1997.
“Who are required to register? All persons, whether natural or juridical, doing business and earning income in any manner or form shall register the business and comply with tax laws, rules, and regulations,” said ACIR Quimosing. And yes, this includes self-employed individuals who have gross sales or receipts of less than P250,000.
For those who have not yet registered their business, ACIR Quimosing shared the good news that they can still do so and avoid penalties, but the deadline is near. “Online business stakeholders are given a one-time chance to have their business registered without penalty for late registration…We have already extended the deadline to August 31, 2020 by the issuance of RMC 75-2020.” Since the deadline falls on National Heroes’ Day – a holiday, registration can be done until the following business day, September 1, 2020.
During the webinar, DivinaLaw Senior Associate Lean Jeff M. Magsombol also shared tips on how online businesses can minimize their internal revenue tax liability by presenting options such as registering as a Barangay Micro Business Enterprise (BMBE), availing of the optional 8% income tax rate, and availing of the Optional Standard Deduction (OSD) which is 40% based on gross sales or receipts for individual tax payers, and 40% based on gross income for corporations.
“Usual expenses for an online business are basic utilities, internet or postpaid bill, but these bills are named after the household. Under the Tax Code, personal expenses cannot be utilized as a deduction. The good thing about OSD is that there is no substantiation required. To avail, the taxpayer should elect that option upon filing of the first quarter income tax return of the business.”
Atty. Magsombol also discussed income tax and business tax as applicable to online transactions, the different types of online business transactions, and basic obligation of businesses such as registration in the appropriate Revenue District Office, securing Authority to Print invoices and receipts, register books of accounts, and of course, issue registered invoice or receipt.
“Taxes for Online Sellers” is the sixth free webinar of the Firm this year that is offered as part of DivinaLaw’s public service and advocacy efforts to offer legal perspective on various relevant topics. The Firm also successfully organized a related webinar “Add to Cart: Legal Perspectives on E-commerce” last June 23.