Taxing my Christmas shopping list has gone online

It’s Christmas time once again and to take the edge off having to shop in crowded malls, many consumers have looked to shopping online. With the convenience offered by the various kinds of safe payment options, selling online has made it the business platform of choice for today’s vendors and consumers.  However, the absence of an actual store, in the case of transactions that are conducted purely online, does not exempt the income from these from tax.  The Bureau of Internal Revenue (BIR) appears to have issued a direct reminder to those parties engaged in online transactions of their tax responsibilities by issuing Revenue Memorandum Circular No. 55-2013 (RMC No. 55-2013).

RMC 55-2013 lays the premise for taxing online transactions by first identifying the different kinds of online business transactions in the Philippines.  These include:

a) Online Shopping or Online Retailing; b) Online Intermediary Service; c) Online Advertisement or Classified Ads; and d) Online Auction. Under the said RMC persons who conduct business through these online transactions have the obligation to:

1. Register the business at the Revenue District Office (RDO) having jurisdiction over the principal place of business or head office.  A BIR Certificate of Registration shall be issued by the RDO, reflecting therein the tax types required of the concerned taxpayer for filing and payment, which shall be displayed conspicuously in the establishment.

2. Secure the required Authority to Print (ATP) invoices, receipts and register books of accounts for use in business.

3. Issue registered invoice or receipt, either manually or electronically, for every sale, barter, exchange, or lease of goods and properties, as well as for every sale, barter, or exchange of service.  Said invoice shall conform to the information requirements prescribed under existing revenue issuances.

4. Withhold required creditable or expanded withholding tax, final tax, tax on compensation of employees and other withholding taxes.  Remit the same to the Bureau at the times required, and issue to the concerned payees the necessary Certificate of Tax Withheld.

5. File applicable tax returns on or before the due dates, pay correct internal revenue taxes and submit information returns and other tax compliance reports.

6. Keep books of accounts and other business or accounting records within the time prescribed by law, and such shall be made available anytime for inspection and verification by duly authorized Revenue Officers for the purpose of ascertaining compliance with tax rules and regulations.

It appears from this RMC that the BIR underscores that a regular taxpayer that conducts business through a ‘brick and mortar’ establishment and those that conduct their business purely online are treated equally, tax-wise and has an equivalent responsibility as far as compliance with tax laws is concerned.  In fact, this issuance does not create new rights or responsibilities on the part of the taxpayer regardless of how the business is conducted.

An example, as set out in this Circular is an online shopping or retailing where the BIR distinguishes payment made through a credit card, banks and cash on delivery.  In this scenario, just like a regular business transaction, the online merchant is obliged to issue a BIR-registered invoice or official receipt and withhold the applicable taxes.  While on the part of the buyer or customer, they are required to receive a payment confirmation and receive an invoice or official receipt upon delivery of the goods or performance of the service.  Transactions which involve payment gateways and freight forwarders are likewise obliged to issue an official receipt or invoice.  This is similar to traditional transactions.

Aside from emphasizing tax duties, another reason why this Circular may have been issued is to fill in the gaps in our Philippine tax laws which makes it easy for online business transactions to fall through the cracks  as far as the BIR’s effort to tax them is concerned.  To address this, a provision has been is in the RMC which imposes the penalties provided for under existing laws, rules and regulations so that these can be applied to online.

It is apparent that the BIR strives to collect taxes whatever the medium of transaction may be.  Indeed, in this day and age of modern technology, it is imperative for the BIR to adjust in order to keep up with the changing times.  The issuance of the RMC 55-2013 is certainly a big step towards having online sellers become good tax citizens.

Carissa Ann M. Eñano 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 [email protected] or [email protected].

For more information on KPMG in the Philippines, you may visit www.kpmg.com.ph.