The Bureau of Internal Revenue (BIR) has recently released the Revenue Memorandum Circular No. 60-2020 which discusses the fact that online sellers or any entities conducting digital transactions will be required to register their businesses and previous activities for taxation purposes until July 31 of this year.
Under the memorandum, any businesses utilizing any kind of digital means must be registered to the BIR; have their issue sales invoice or official receipt for every sale of goods or services; keep a registered book of accounts and other accounting records of a business transaction; and file and pay tax returns on time.
Failing to abide by the registration period
Entities that fail to abide by the registration period on or before July 31 shall be imposed with a penalty for late registration.
The memorandum circular declares that it was issued to give online sellers paying their tax shorthand notice before the deadline and to guarantee that businesses are abiding the provisions of Section 236 of the Tax Code and that they are tax compliant.
As per the memorandum, partner sellers, merchants, as well as other stakeholders would be required to undergo the said change.
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.”
Things Online Sellers and Freelancers Alike Must Know Before Paying Their Taxes
As such, online sellers and freelancers alike need not be alarmed. There actually are some guidelines which could better help freelancers and online sellers upon registering their businesses:
The registration of your business must either be a sole proprietorship, self-employed professional, or a corporation depending on the person’s situation. Most home-based online businesses are merely sole-proprietorship and may start registering their businesses with the Department of Trade and Industry (DTI) first before proceeding with BIR.
You can click here to view the guide on how you can register through the DTI: DTI Business Name Registration Online – Requirements and Procedure
Keep in mind that there are pertinent tax brackets for online sellers paying their tax. For such instance; if an online seller’s annual sales or professional fees do not exceed P250,000 a year, they will pay zero (P0.00) tax.
However, the online seller will still be required to file their annual Income Tax Returns (ITR). As per the bureau, this is for formality only so they can get their receipts printed and are able to issue sales invoices to their customers. Their invoice statements will be the basis for the seller’s total annual income that will be computed for their taxes in the coming year.
Meanwhile, if they earn more than P250,000 but less than P3,000,000 in sales or professional fees annually; they are given two options applicable to online sellers paying their tax:
- The first one is to pay a flat 8% tax from their gross receipts; while
- The second is to pay the tax depending on their graduated income tax (0% to 35%) which is a better option for online sellers who have large operating expenses that can be deducted from their annual revenue.
Fair or Not?
With the situation that the pandemic gave us now, do you think that it’s just a fair act? Or is this something that the Philippine government can improve?
There are actually were senators that questioned the move of requiring online sellers paying their tax; they were saying that it’s an ill-timed move in the middle of the pandemic.
Senator Joel Villanueva, for one, said that rather than being a burden for most Filipinos trying to earn online, why not go for Philippine Offshore Gaming Operators (POGOS)?
We know the government needs to collect taxes. It must first go after those with proven tax liabilities. Up to now, Pogos have yet to pay the P50 billion they owe. They should be the focus of the BIR.”
Focusing on POGOs
Senator Risa Hontiveros said that our lax on POGOs but cruelty to the Filipino people should be changed. She suggested putting the welfare of the Filipino people first.
Why are we lax on Pogos but cruel to Filipinos? Can we put Filipinos’ welfare first?”
People are still debating whether it is justifiable that online sellers are paying their tax or not. What do you think? Is digital economics an arising economic opportunity and must online businesses be taxed or not? If yes, for what purpose?