Call for inputs on online taxation: BIR Draft Revenue Memorandum Circular on “Reiterates Taxpayer’s Obligations in Relation to Online Business Transactions”

When the E-Commerce Law was passed, one of principles cited in its implementing rules and regulations is the concept of “neutral tax treatment”. This means policies governing the offline world, such as taxation, shall also apply in the online world.

After 12 years of the E-Commerce Law, the Bureau of Internal Revenue is in the process of coming up with a Revenue Memorandum Circular on “Reiterates Taxpayer’s Obligations in Relation to Online Business Transactions“.

I got an invitation for an October 30 meeting on the matter and invited members of the DigitalFilipino Club to attend.

During the meeting, BIR shared that it is taking this action based on the feedback received from the Philippine Retailers Association that considers online stores and shops as a growing competitor segment. BIR made an initial study and is concern on high-volume sellers (like those selling motorbikes) who are not BIR registered.

BIR also attempted to organize a meeting with some of the online merchants directly prior to contacting us but did not receive any reply.

During the meeting held at the BIR Office, the following documents were presented. Participants gave clarification and correction as needed.

Draft Revenue Memorandum Circular for Online Transactions

Draft Revenue Memorandum Circular for Online Transactions Annex A

For the DigitalFilipino Club, we agreed that we will consolidate our feedback and suggestion for BIR’s consideration on November 7, 2012. Club members will contact me in this regard on their inputs.

We encourage other groups and parties with inputs to come up with a position paper and submit to BIR (email it to: ana.ria.esquivel@bir.gov.ph). A webinar will be scheduled in the next 2 weeks with the BIR to allow greater audience participation in the discussion.

I looked at the document with the following premise and immediate feedback in mind (more will be added):

On BIR:

1. BIR wants online sellers to be properly registered and issue official receipts to protect the consumer.

2. BIR wants to collect taxes due to the government.

From an online entrepreneur:

1. The income ceiling needs to be clearly defined as to what is taxable or not. Although this doesn’t remove the requirement of issuing receipts to buyers.

2. We want an online and friendly TIN registration, authority to print official receipt, authority to issue online receipt, and income reporting process.

3. As online selling can also be seasonal, such as selling fruitcake during December, exemptions given to bazaars should also apply to online merchants.

4. For seasonal sellers (tangible products or services), BIR needs to make income declaration and payment easy. Payment of tax should be allowed at any bank rather than be limited to residence location (as some service providers have no fixed regular location). Limit minimum registration requirement to BIR especially to individual sellers of products or services that don’t have a physical presence or office.

5. Online sellers not to be subjected to monthly filing of “no income” as this will be a hassle to seasonal sellers who have no business for most of the year.

6. As a lot of online entrepreneurs did not go through proper education on tax process, BIR needs to be proactive and friendly in providing learning materials about it.

7. The online tax policy to be non-retroactive in order not to scare current online merchants who may have missed their tax duties.

8. The least I want is to hear news of BIR examiners harassing online merchants. This will deter e-commerce growth. Instead BIR should provide some form of incentive in recognizing legitimate taxpayers online.

I will be updating the above further.

Janette Toral is an e-commerce advocate in the Philippines. She is the site owner of DigitalFilipino.com.

Janette Toral – who has written posts on DigitalFilipino: E-Commerce in the Philippines.


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