Full Text of RMC No. 55-2013
Given the continuing advances in information technology, the internet has become the vogue medium not only for business advertisements but also for the conduct of online business transactions, including online retailing through virtual shopping malls, online market places, webstores, and similar websites (or “online stores”). An increasing number of consumers are visiting and purchasing goods and services from such online stores primarily because of the high level of convenience inherent in online shopping which can be done within the confines of one’s home, office, and even in public places offering internet access.
In view of the foregoing, it has become imperative to remind the parties in these online business transactions of their tax obligations, hence this circular.
For additional guidance, the following are some of the kinds of online business transactions, classified as to their participating parties:
- 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 described as follows:
1. Online shopping or online retailing – This is a form of electronic commerce whereby consumers directly buy goods or services from a seller over the internet without an intermediary service. An online shop, e-shop, e-store, internet shop, web shop, web store, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-mortar-retailer or shopping center.
2. Online intermediary service – An intermediary is a third party that offers intermediation services between two trading parties. The intermediary acts as a conduit for goods or services offered by a supplier to a consumer, and receives commission therefor. In this case, the relationship between the intermediary and the merchant shall be that of a principal-agent relationship which shall be governed by their agreement including but not limited to the amount of commission, manner of transmitting the same, etc.
However, in the following instances the intermediary service provider shall be considered the merchandiser/retailer itself:
- when consumers buy goods or services from an intermediary service provider who controls such collection of buyers’ payments, and thereafter receives commission from the merchant/retailer
- when the intermediary markets multiple products for its own account (considered retailer or merchandiser as to the said products).
3. Online advertisement/classified ads – Online advertising is a form of promotion that uses the internet to deliver marketing messages to attract customers.
4. Online auction – These are auctions conducted through the internet via an online service provider that specifically hosts such auctions. Through this service, the seller sells the product or service to the person who bids the highest rice.
II. Policies and Guidelines
Like any other business establishments, persons who conduct business through the above-described online transactions and its permutations have the obligations to:
- 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 the registration fee to any Authorized Agent Bank (AAB) located within the RDO. 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 business establishment; For service from Fully-Verified banking companies, people can check out here and get the best ones in market, which also includes kyc services.
- Secure the required Authority to Print (ATP) invoices/receipts and register books of accounts for use in business, which may either be:
- Manual books of accounts, booklets of invoices/receipts, accounting records or loose-leaf of such;
- Computerized Accounting System (CAS) and/or its components including e-Invoicing System under Revenue Memorandum Order (RMO) No. 21-2000 as amended by RMO No. 29-02.
- 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 or receipt shall conform to the information requirements prescribed under existing revenue issuances, and shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of the latter’s accounting records;
- Withhold required creditable/expanded withholding tax, final tax, tax on compensation of employees, and other withholding taxes. Remit the same to the Bureau at the time or times required, and issue to the concerned payees the necessary Certificate of Tax Withheld.
- 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; and
- Keep books of accounts and other business/accounting records within the time prescribed by law, and such shall be made available anytime for inspection and verification by duly authorized Revenue Officer/s for the purpose of ascertaining compliance with tax rules and regulations.
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 distinction on whether or not the marketing channel is the internet/digital media or the typical and customary physical medium.
III. Obligations and Duties / Basic Compliance of Parties to Different Types of Online Transactions
A) Online Shopping or Online Retailing
(1) Online Merchant/Retailer – If the buyer’s payment is:
- thru credit card companies: The Online Merchant/ Retailer is obliged to (a) issue electronically the BIR registered Invoice/OR for the full amount of the sale to the buyer; (b) issue acknowledgment receipt to the credit card company for the amount received; and (c) pay the commission of credit card company net of 10% Expanded Withholding Tax (EWT).
- thru the banks: The Online Merchant/Retailer is obliged to (a) issue Invoice/OR to the buyer for the payment of the goods/services; and (b) issue acknowledgment receipt to the bank for the amount received.
- Cash on delivery or in the office of merchant (on sale of goods for pick-up by the customer): The Online Merchant/Retailer is required to issue either electronically or manually the BIR registered Invoice/OR for the full amount of the sale to the buyer.
(2) Buyer/ Customer- If payment to seller is:
- thru credit card: The Buyer/Customer is required to (a) receive the Payment Confirmation, under the name of the merchant, for the purchase price charged by the credit card company; and (b) receive Invoice/OR from the merchant upon delivery of the goods or performance of service.
- thru the banks: The Buyer/Customer is required to (a) receive validated copy of the deposit slips made in the name of the merchant; and (b) receive Invoice/OR from the merchant upon delivery of the goods or performance of service.
- Cash on delivery or in the office of merchant (on sale of goods for pick-up by the customer): The Buyer/Customer is required to receive either the electronic or manual registered Invoice/OR for the full amount of payment made to merchant/retailer.
(3) Payment Gateways
- Credit Card Companies are obliged to (a) issue Payment Confirmation, in the name of the merchant-seller, for the purchase price charged to buyer; (b) remit to merchant-seller the price less EWT of ½ of 1%; (c) remit to BIR the EWT of ½ of 1%; and (d) receive agreed commission from merchant, net of EWT of 10%.
- Banks (over the counter) are obliged to (a) issue validated bank deposit slips in the name of merchant to the depositor-buyer; and (b) remit the amount to the merchant.
For this purposes, payment gateways/payment settlement entities refer to banks or other organizations and third party settlement organizations that has contractual obligation to make payment to participating payees in the settlement of the transactions. These include, but are not limited to, credit card companies, banks, financial institution, and bill paying services.
(4) Freight Forwarders and Online Website Administrators are likewise obliged to issue, either electronically or manually, the BIR registered OR for the service fees paid by the merchant or advertisers.