As a general principle under the Philippines Tax Code, a) Filipino citizen or corporation income earned within and outside of the Philippines; or b) foreign citizen or corporation income within the Philippines are taxable. As noted the tax code distinguishes income only base on the location, whether it is within or outside the Philippine territory not based on platform offline or online.
On August 5, 2013 Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) 55-2013, Reiterating Taxpayers’ Obligations in Relation to Online Business Transactions, to reiterate those engage on online transactions of their tax obligation (Refer to RMC 55-2013 for more details). On July 1, 2020, BIR issued RMC 60-2020 to remind and “give notice” to all who are doing business or earning income online with their tax compliance. RMC 60-2020 also advises newly-registered businesses to comply on the following:
- Issuance of registered Sales Invoice or Official Receipt for every sale of goods or services to clients/customers/buyers;
- Keeping of registered Books of Accounts and other accounting records of business transactions;
- Withholding of taxes, as applicable;
- Filing of required tax returns; and
- Payment of correct taxes due on
Please be guided by the provision of RMC 60-2020.
Registering the businesses of Online Sellers does not determine the income taxability under current tax rules as Online Sellers just like everyone else can enjoy tax exemptions under Revenue Regulation (RR) 11-2000 Issued on December 29, 2000 or under Barangay Micro Business Enterprise (BMBE) under Republic Act N0. 9178
RR 11-2000 prescribes the registration and filing of income tax returns and payment of income tax, if any, of marginal income earners with gross sales/receipts not exceeding P 100,000.00 during any twelve (12) month period. Marginal income earners will be given the opportunity to register with the Bureau of Internal Revenue, with no charge and without complying with the usual documentary requirements, such as maintenance of books of accounts and issuance of registered receipts/invoices.
BMBE under Republic Act N0. 9178 provides incentives and benefits to
“Barangay Micro Business Enterprise,” hereinafter referred to as BMBE, refers to any business entity or enterprise engaged in the production, processing or manufacturing of products or commodities, including agro-processing, trading and services, whose total assets including those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00).
Also, Non-VAT registered Online Sellers have the option of 8% tax based on gross income in lieu of income tax and 3% other percentage tax.
Disclaimer: This article is for discussion purposes only as summarized by the author and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for specific details applicable to your circumstances.