RMC 55-2013: Tax Rules and Obligations on Online Business Transactions

Many of us buy and sell goods, virtual goods and services using a virtual marketplace called the Internet.  More and more transactions are entered into online including, but not limited to:

  • Purchase of goods and services for personal use
  • Purchase of goods and services for business use
  • Purchase of virtual goods (music, e-books, applications, softwares, games, even virtual currencies)
  • Applying for employment
  • Applying for exams, reviews and certifications
  • Placing products on auctions/public bidding

Internet is a big marketplace for tangible and intangible goods ranging from antivirus, office applications and software, mobile phones, smart phones, digital camera, smart TV, computers, laptops, accessories, cool gadgets, dress, shoes, jewelries, foods (like cakes, processed and preserve foods, fresh produce, etc.) and almost everything we can’t imagine (like in ebay or amazon). There are, in fact, so many transactions happening online in the internet where, tax implications are often not considered.  As a business entity or an individual, we are reminded to always consider the tax implications of doing business online.

Advertisements

Issuance of Revenue Memorandum Circular No. 55-2013

The Philippine Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 55-2013, Reiterating Taxpayers’ Obligations in Relation to Online Business Transactions, dated August 5, 2013 to remind taxpayers, buyers and online intermediaries of their tax obligations when doing online transactions.  Among those online business transactions, classified as to participating parties are:

  • Business to Consumer (“B2C”): which involves online stores selling goods and services to final consumers;
  • Consumer to Consumer (“C2C”); and
  • Business to Business (“B2B”): which encompasses job recruitment, online advertising, credit, sales, market research, technical support, procurement and different types of training.

The most common types of online business transactions in the Philippines are as follows (see full text below for the description):

  1. Online shopping or online retailing
  2. Online intermediary service
  3. Online advertisement/classified ads
  4. Online auction

Summary of Policies and Guidelines

Persons who enter into online business transactions have obligations to (see full text below for the details):

  • Register the business at the Revenue District Office (RDO) having jurisdiction of the business
  • Secure the required Authority to Print (ATP) invoices/receipts and register books of accounts for use in business
  • Issue registered invoice or receipt, either manually or electronically
  • Withhold required creditable/expanded withholding tax, final tax, tax on compensation of employees, and other withholding taxes.
  • File applicable tax returns on or before the due dates, pay correct internal revenue taxes, and submit information returns and other tax compliance reports
  • Keep books of accounts and other business/accounting records within the time prescribed by law

The existing tax laws and revenue issuances on the tax treatment of purchases (local or imported) and sale (local or international) of goods (tangible or intangible) or services shall be equally applied with no distinctionon whether or not the marketing channel is the internet/digital media or the typical and customary physical medium.

It is important to note that same tax rules applies whether or not these are conducted online or the traditional way of transacting these.

Advertisements

Duties and Obligations of Parties to Online Transactions

The duties and obligations basically revolves around the issuance of proper documents for online transactions (e.g. BIR-registered receipts, invoices, acknowledgement documents and other relevant documents, whether electronically of manually) and withholding and remittance of applicable withholding taxes.

RMC No. 55-2013 outlined the duties and obligations of parties on these three most common types of online business transactions (see full text below for the details):

  • Online shopping or online retailing 
    • Online Merchant/Retailer
    • Buyer/ Customer
    • Payment Gateways
    • Freight Forwarders and Online Website Administrators
  • Online intermediary service
    • Online Intermediary
    • Merchant/Retailer
    • Buyer/ Customer
    • Payment Gateways
    • Freight Forwarders and Online Website Administrators
  • Online advertisement/classified ads
    • The Advertising Entity
    • Merchant/ Retailer
    • Buyer/Customer
    • Payment Gateways
    • Freight Forwarders and Online Website Administrators
  • Online auction
    • Auction Webstores
    • Merchant/ Retailer
    • Buyer/Customer
    • Payment Gateways
    • Freight Forwarders and Online Website Administrators

Impact to Business

There is really no significant impact to businesses if they are already complying with all the existing tax laws and regulations.  The persons most affected by RMC No. 55-2013 are those:

  • Individuals that are doing business in online in the internet but a currently not registered with the BIR at their respective RDO.  This is particularly true when online selling or buying is just a part-time job/work.
  • Entities who have not registered their invoices being issued online.  Imagine an entity selling its products in ebay or amazon or other online market place – the invoices given to the buyers are those that of the intermediaries and are most probably not the registered invoices of the seller.
  • Those who are not familiar with tax laws and regulations.

BIR issued this RMC as the’ve seen growth in the number of these kinds of transactions and will most likely will scrutinize businesses and monitor compliance.  RMC No. 55-2013 is a mere reiteration to remind taxpayers and probably to make the tax application clearer.  It is therefore clear that any noncompliance may, at most cases, lead to administrative penalties and assessments as covered by existing regulations.

2 Responses to "RMC 55-2013: Tax Rules and Obligations on Online Business Transactions"

  1. The where are you principally doing your business? What form of business are you doing po ba? Kasi whatever business it is, you need to register a business address po. If you don't want to make your residence address as your business address, you have to find a new address (e.g. rent some office space) that you can make your business address.

    Reply

Leave your Comment!