Tax treatment of online transactions

The Bureau of Internal Revenue (BIR) has issued the following reminders on the tax obligations of different parties engaged in online business transactions, which cover online shopping or online retailing, online intermediary service, online advertisement/classified ads, and online auction.

Registration requirements

Persons who conduct business through online transactions must undergo the following stages in the registration process:

1. Register the business at the Revenue District Office (RDO) having jurisdiction over the principal place of business/head office (or residence in case of individuals) by accomplishing BIR Form 1901 (for individuals) or 1903 (for corporations or partnerships), and pay theregistration fee to any Authorized Agent Bank (AAB) located within the RDO

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

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

4. Withhold and remit creditable/ expanded withholding tax, final tax, tax on compensation of employees, and other withholding taxes, and issue the corresponding withholding tax certificates

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, such as the Summary List of Sales/Purchases (SLS/P), Annual Alpha List of Payees, etc., at the time or times required by existing rules and regulations

6. Keep books of accounts and other business/accounting records within the time prescribed by law, and make them available anytime for inspection and verification by duly authorized Revenue Officer/s for the purpose of ascertaining compliance with tax rules and regulations

Tax compliance obligations of parties to different types of online transactions

The BIR outlined the duties and obligations of parties in different types of online transactions. Depending on the type of online transaction, the parties may include buyer/customer, freight forwarders, online website administrators, and payment gateways (credit card companies and banks).

The obligations and duties of parties to the online transactions cover the issuance of BIR-registered manual or electronic invoices and receipts, acknowledgment receipts, and imposition of creditable withholding tax, as well as remittance and issuance of certificates of withholding tax.

For a detailed discussion on the obligations and duties of parties in online transactions, see Revenue Memorandum Circular No. (RMC) 55-2013.

Penalty provisions

Any person engaged in internet commerce who fails to comply with applicable tax laws, rules and regulations shall be subject to imposition of penalties under existing laws, rules and regulations, in addition to the imposition of penalties pursuant to applicable provisions of the Tax Code.

(Revenue Memorandum Circular No. 55- 2013, August 22, 2013)

Tax Brief – September 2013

Punongbayan and Araullo