BIR eyes higher tax take from online sellers

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By Beatrice M. Laforga, Reporter

ALL ONLINE businesses are given until July 31 to register for tax compliance with the Bureau of Internal Revenue (BIR), as the government seeks to plug tax leakages and raise revenues.

BIR Commissioner Caesar R. Dulay issued Revenue Memorandum Circular (RMC) No. 60-2020 on June 1, ordering online businesses to register or update their registration until July 31. A copy of the circular was uploaded on the BIR website on Wednesday evening.

“This circular is issued to give due notice to all persons doing business and earning income in any manner or form, specifically those who are into digital transactions through the use of any electronic platforms and media, and other digital means, to ensure that their businesses are registered pursuant to the provisions of Section 236 of the Tax Code, as amended, and that they are tax compliant,” the BIR said.

The order applies to partner-sellers or merchants as well as to “other stakeholders involved such as gateways, delivery channels, internet service providers and other facilitators.”


BIR Deputy Commissioner for Operations Arnel SD. Guballa told BusinessWorld the circular was issued after Finance Secretary Carlos G. Dominguez III ordered the BIR to start collecting taxes from the digital economy.

The e-commerce sector has been growing as strict lockdown measures forced people to stay at home and businesses to close brick-and-mortar shops.

“As mandated by secretary of Finance, BIR would collect taxes from the digital economy which other Asian countries are now doing. Since online selling is the new normal, BIR now is requiring all online sellers to register,” Mr. Guballa said in a text message on Thursday.

He emphasized all businesses, including small sellers of products on social media sites are covered by the circular, as long as they conduct transactions online.

In May, Mr. Dominguez said the Department of Finance (DoF) and BIR were studying measures on how to capture the potential value-added tax (VAT) leakages in the digital economy.

If the 12% VAT can be charged on online transactions, DoF estimated the government can collect P14-17 billion in additional revenues.

The government is looking for new sources of revenues after tax collections plunged in April due to the lockdown.

BIR’s April tax collections plummeted by 70% from a year ago to P71.78 billion after tax payments were deferred.

Under the new circular, the BIR also urged businesses to voluntarily declare their past transactions that are subject to pertinent taxes and pay the taxes due, without incurring penalties.

“All those who will be found later doing business without complying with the registration/update requirements, and those who failed to declare past due taxes/unpaid taxes shall be imposed with the applicable penalties under the law, and existing revenue rules and regulations,” BIR said.

Newly registered businesses and existing applicants will also have to issue a registered sales invoice or official receipt for every sale of goods or services and keep a registered book of accounts and accounting records of transactions.

Online businesses are also ordered to withhold taxes, if applicable, as well as file required tax returns and pay “correct taxes due on time.”

Registrations are usually done at Revenue District Offices, BIR said.

Those conducting online businesses that do not have a taxpayer identification number (TIN) will have to register their businesses following existing guidelines on securing TIN and registration.

For those with TINs but whose businesses are not yet registered, BIR said individuals will have to register their businesses using BIR Form 1901. For non-individuals, they will have to update their business registration using BIR Form 1905 and include the additional business activity of online selling.

House Bill No. 6765 or the Digital Economy Taxation Act, which seeks to impose a 12% VAT on advertising, subscriptions and transactions made via e-commerce platforms, has been filed at the House of Representatives.