The coronavirus pandemic has caused hundreds of businesses to shutter and thousands of people to lose their jobs. In this economic recession, many turn to other methods of earning to cope with the “new normal.”
A lot of people have discovered newfound hope in online selling. This strategy gives them a bit of income to support their day-to-day needs while still adhering to social distancing measures. Alas, in addition to managing their business and taking care of their families, online sellers will have one more thing to worry about: BIR tax compliance.
Tax Compliance for Online Entrepreneurs Explained
In the Revenue Memorandum 60-2020, BIR announced those conducting businesses on any form of digital platform are required to register with the bureau. This new directive not only includes online sellers, but also content creators, bloggers and vloggers, filmmakers, and other independent creatives who earn from digital channels.
The memorandum drew flak from small-scale online entrepreneurs. Many sellers expressed their frustration, saying that the bureau was overburdening people instead of helping them cope with the financial crisis caused by the pandemic.
Several lawmakers also opposed the imposed tax compliance. Sen. Joel Villanueva reasoned that if the government needs to collect taxes to raise funding for the pandemic response, it should go after Philippine offshore gaming operators (POGOs) first.
POGOs still owe the government P50 billion in taxes.
However, the BIR clarified that the new directive doesn’t include small online businesses. The bureau is looking to tax major online shopping platforms and digital services, such as Netflix and Lazada. BIR deputy commissioner Arnel Guballa added that the purpose of the new tax policy is to ascertain the total population of individuals and enterprises earning from digital platforms.
If you’re an online seller and are confused about the tax compliance order, below are several details about the directive you should know.
Do You Qualify?
Online sellers who earn less than ₱250,000 annually aren’t required to pay income tax. However, you’re still required to register your business with the BIR. You are to register your activities, declare previous transactions, and settle any corresponding taxes on or before July 31, 2020.
You’ll face penalties if you fail to settle your account later than the deadline. The same goes if you are found conducting an online business without complying with the registration requirements.
Apart from the BIR registration, you must also meet the following requirements to operate an online business:
- Have a Tax Identification Number (TIN)
- Issue proper invoices or receipts
- Keep updated and accurate books of accounts
- File and pay tax returns on time
If you haven’t yet, here’s a step-by-step guide to help you navigate the BIR registration process.
Registration Process
1. Apply for a TIN if you don’t have one yet and register as a self-employed individual. This step will also cover the registration of Books of Accounts and application for Authority to Print Receipts.
2. Head over to the Revenue District Office (RDO) with jurisdiction over the location of your business. If your business has no physical establishment, your home address will determine which RDO you’ll go.
3. Fill out the BIR Form 1901 and 1906. Submit any government-issued ID, a photocopy of your Mayor’s Business Permit, DTI Certificate (if you have an official business name), and other supporting documents.
4. Pay the necessary fees. The registration fee is ₱500, with an additional ₱30 for the documentary stamp tax.
After paying, you’ll receive the following documents: Certificate of Registration, Authority to Print Receipts, copy of BIR Registration Form, and proof of payment of registration fee.
For tax queries and concerns, you can call BIR on one of their trunklines or email them at contact_us@bir.gov.ph.
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