New rules of taxation for ‘tiangge’ operators and organizers

Christmas, the happiest, biggest and longest holiday in the Philippines is just around the corner. Soon bazaars or “tiangges” will be sprouting in every corner to lure every eager shopper.

Perhaps, foreseeing the proliferation of “tiangges” this Christmas season, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 16-2013 (dated Aug. 22, 2013), prescribing new rules on the collection of business and income taxes including withholding tax on income payments by or to “privilege stores” (popularly known as “tiangge/s”) as well as the obligations of organizers and operators of “tiangges” which took effect last Oct. 12, 2013.

A privilege store or “tiangge” refers to a stall or outlet not permanently fixed to the ground and is normally set up in places like shopping malls, hospitals, office buildings, hotels, villages or subdivisions, churches, parks, streets and other public places for the purpose of selling a variety of goods/services for short durations of time or during special events. Under RR 16-2013, the term “privilege store” is limited to stalls or outlets engaged in business not exceeding fifteen (15) days in any taxable year. If the privilege store is operating more than one business activity in a separate venue or simultaneously operating several or multiple business activities in one venue, the number of days per business activity is added to arrive at the cumulative number of days in a given taxable year.

Under the new RR, the obligations of a “Privilege Store Operator” are as follows:

• On or before commencing business operations, the “tiangge” operator must obtain a Tax Identification Number (TIN) from the Revenue District Office (RDO) having jurisdiction over the “tiangge” location.  Thereafter, he must submit an Information Statement on Privilege Store Activities which must indicate, among others, the inclusive dates of business operations, name of exhibitor/organizer, TIN of exhibitor/organizer/lessor, name of event/exhibit, address/venue of the event/exhibit, and duration of operations in any given year;

• During operations, the “tiangge” operator is required to keep and maintain books of accounts and to issue official receipts/sales or commercial invoices provided by the exhibitor/organizer. Moreover, this operator is also obliged to withhold taxes on rental payments it made to the exhibitor/organizer and remit the same to the BIR using the BIR Form 1601E (Monthly Remittance Return of Creditable Income Taxes Withheld);

• Within five days after the privilege store operation, the “tiangge” operator must submit a List of Sales on Privilege Store Activities to the exhibitor/organizer.  Further, the store operator shall report the income he earned in his annual income tax return (BIR Form 1700) which is due on or before April 15 of the year following the calendar year the income was earned.

The new RR further prescribes that the “tiangge” operator shall register with the BIR as a regular taxpayer if the operation of the “tiangge” exceeds 15 days in a taxable year.  As a regular taxpayer, the “tiangge” operator is required to have his own sets of invoices and/or official receipts and pay taxes such as income tax, business tax (VAT or percentage tax) and remit withholding tax on rental payments.

The new RR also prescribes the tax obligations of exhibitors or event organizers, as follows:

• To post in a conspicuous place in the area devoted to the establishment of “tiangges” its Certificate of Registration (COR).

• To furnish the RDO having jurisdiction over the place where the event is held with specific dates and duration when the event or exhibit shall be conducted, together with a list of the names, addresses, TINs, and slot/unit number in the privilege store outlet, of the “tiangge” operators.

• To provide “tiangge” operators with Cash Register Machines/Point of Sale (CRM/POS), or allow the use of its own manual official receipts/sales invoices.

• Exhibitors or event organizers are also mandated to comply with the withholding tax regulations and the reportorial requirement for establishments leasing or renting out spaces for commercial activities as prescribed by RR No. 12-2011. 

Indeed, the growing popularity of “tiangge” as a medium to sell goods to the consumers has put the “tiangge” organizers and operators in the radar screen of the BIR. While the impact of the new RR remains to be seen, many are already predicting that we will be seeing fewer “tiangges” this Christmas season.  

Claudio Jose Lorenzo A. Salvador is a supervisor from the tax group of Manabat Sanagustin & Co. (MS&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The view and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or MS&Co. For comments or inquiries, please email manila@kpmg.com or rgmanabat@kpmg.com

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