Individuals and businesses who are engaged in online selling in the Philippines should take careful note of how the country’s Bureau of Internal Revenue (BIR) collects taxes from these types of entities.
Those entities that are conducting business through online transactions are required to register at their local Revenue District Office and pay a registration fee. Once this has been completed, a BIR Certificate of Registration will be issued – this document will make clear the types of tax that need to be filed and paid by the taxpayer. An additional requirement is that online sellers must be granted an Authority to Print for invoices, receipts, and register books of accounts. The types of official invoices and receipts that are required to be issued include:
- Sales invoices
- Delivery receipts
- Charge invoices
- Other commercial receipts for goods or services
Another additional requirement states that online sellers must withhold the required creditable/expanded withholding tax, final tax, tax on compensation of employees, and other withholding taxes. Once this has been done, the revenue collected must be remitted to the BIR and the customers should be issued a Certificate of Tax Withheld.
In order to show proof of income and expense, all taxpayers, including online sellers, are required to issue official invoices and receipts for each sale of goods and services rendered over the amount of PHP25 (US$0.57). Failure to issue these receipts could result in serious repercussions, such as the suspension of the business by the BIR. Other requirements required by the BIR for online sellers include:
- Tax returns must be filed on or before the due dates
- The correct taxes must be paid
- Information returns and other tax compliance reports (ex. Summary List of Sales/Purchases) must be submitted as required by existing rules and regulations
This tax on online sellers came about because the Philippine government was looking to widen its attempts at building a larger tax base with which to build state revenues. The BIR has stated that “it has become imperative to remind the parties in these online business transactions of their tax obligations,” since the internet has become “the vogue medium not only for business advertisements but also for the conduct of online business transactions, including online retailing through virtual shopping malls, online market places, web stores, and similar websites (online stores).”
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