Corporate News

By Melissa Luz T. LopezReporter

Tax rules for online firms out soon

Posted on February 19, 2016

THE BUREAU of Internal Revenue (BIR) will soon release an order that would detail the tax liabilities of e-commerce companies, as part of the agency’s efforts to fortify tax administration.

BIR Commissioner Kim S. Jacinto-Henares said the agency will come out with an issuance covering the “digital economy,” or companies that buy and sell products and services on the Internet.

“I’m going to come out [with an order] for the digital economy within the next few weeks,” the BIR chief told reporters on the sidelines of the agency’s tax campaign kick-off in Makati City yesterday.

Asked who will be covered by the upcoming issuance, Ms. Jacinto-Henares said it would involve “whoever uses the digital platform to sell, to provide service, and receive payments.”

The official said that while the existing Tax Code should already apply to online sellers, the regulation would serve as a reminded by spelling out the taxes that they must settle.

Among the popular online-based shops are Lazada, Zalora and OLX, which also serve as online marketplaces. Some online sellers also conduct business through social media platforms like Facebook and Instagram, with payments made via fund transfers and bank deposits.

The sellers are expected to remit a 12% value-added tax (VAT) for the transactions, personal income taxes, and percentage taxes for any sales made, the same duties levied from offline entrepreneurs as in the National Internal Revenue Code of 1997, according to the BIR chief.

Under the law, persons selling items and services who make less than P1.92 million a year must remit to the government 3% of what they earn monthly. Those who make more than P1.92 million, meanwhile, must subject their sales to VAT.

“At the end of the day, I don’t even have to come up with issuances because it is in the Tax Code. It’s actually the law itself can apply, it’s just people don’t want to [comply],” Ms. Jacinto-Henares said.

In October, the tax collection agency came out with Revenue Memorandum Circular 70-2015 that defines the set of taxes due from mobile app-based ride platforms such as Uber and Grab. The regulation spells out the liabilities of operators and car owners such as the 3% common carriers tax, while drivers are to pay income tax.

“I already came out with the issuance, I expect them to follow it. If they don’t, they’re gonna blame me if I file cases against them,” Ms. Jacinto-Henares said, though saying that they are currently coordinating with the service providers to collect data on transactions and earnings.

In January, the Finance department set a P2.025-trillion collection target for the BIR, a level deemed “unrealistic” by Ms. Jacinto-Henares.

Economic managers are seeking to raise the country’s revenue effort to 18.1% of gross domestic product this year to raise more funds for state programs, as it eyes to bring economic growth to as much as 7.8% in 2016.