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Philippines: Philippines To Collect Taxes from Online Sellers

Monday, 26 August 2013   (0 Comments)
Posted by: Author: Mary Swire
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Author: Mary Swire

As it continues its attempts to find additional tax revenue, the Philippines' Bureau of Internal Revenue (BIR) has issued a memorandum in which it confirms that, as allowed for in the country's tax code, it will start collecting taxes from individuals and businesses selling products online.

With the internet becoming "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, web stores, and similar websites (online stores)," the BIR feels that "it has become imperative to remind the parties in these online business transactions of their tax obligations."

Like any other business establishments, individuals or businesses who conduct business through online transactions and its permutations have the obligation to register at their Revenue District Office and pay a registration fee. A BIR Certificate of Registration will be issued, reflecting the tax types required to be filed and paid by the relevant taxpayer.

An Authority to Print invoices/receipts and register books of accounts for use in business will also be required. Official invoices and receipts (ORs), including sales invoices, delivery receipts, charge invoices and other commercial receipts for goods or services, will be required to be issued.

Under the Philippines tax code, all taxpayers are required to issue ORs, as proof of income and expense, for each sale of goods and services rendered over the amount of PHP25 (USD0.57). Failure to issue ORs could be the grounds for the suspension of a business and for the BIR to make an additional assessment for income or value added tax.

Online sellers will also need to withhold the required creditable/expanded withholding tax, final tax, tax on compensation of employees, and other withholding taxes, and remit the revenue collected to the BIR, having issued to their customers the necessary Certificate of Tax Withheld.

Finally, they must file tax returns on or before the due dates, pay the correct taxes, and submit information returns and other tax compliance reports, such as the Summary List of Sales/Purchases, as required by existing rules and regulations.

The BIR stresses that the existing tax code, "on the 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."

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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