Online sellers will benefit from registering with the Bureau of the Internal Revenue (BIR) as it puts them in the formal economy eligible to government assistance programs, the Department of Finance (DOF) said.

DOMINGUEZ new photo jan212020 - DOF urges online sellers to join formal economy

Finance Secretary Carlos G. Dominguez III

Finance Secretary Carlos G. Dominguez III said that Revenue Memorandum Circular (RMC) No. 60-2020 is not solely intended for the government to raise additional revenue, but to set an organized system for the rapidly advancing digital economy.

“Registering with the BIR not only help the government generate additional revenue for its various projects. Joining the formal economy also ensures that these businesses and their employees are eligible for government assistance programs,” Dominguez told reporters.

For instance, Dominguez said “only those small businesses that are registered with the BIR and the Social Security System can avail of the Small Business Wage Subsidy program.”

“Likewise, only registered businesses may avail of government loans like the COVID-19 Assistance to Restart Enterprises (CARES) Program by the Department of Trade and Industry,” he added.

But as he reiterates that RMC No. 60-2020 is just a reminder to everyone in the Philippines who are engaged in online selling to register with the BIR, Dominguez said this is the beginning of a tax collection program on digital transactions.

But at the same time, Dominguez allayed fears that the registration of online shops with the BIR would only burden small entrepreneurs.

Citing the tax reform for acceleration and inclusion (TRAIN) law, Dominguez said that small entrepreneurs earning less than P250,000 annually enjoy zero income tax, while their sales below P3 million are exempted from value-added tax (VAT).

“What we are asking right now is just for online sellers to register with the BIR,” Dominguez said, noting there are tax privileges granted by TRAIN to help small business owners.

He clarified the notion that registering with the BIR would automatically require online vendors to pay taxes, saying there are “specific circumstances” before a taxpayer will be subjected to levies.

Self employed individuals are subject to the graduated rates in the Tax Code. For instance, a seller earning less than P250,000 will be subject to zero income tax. The rates for individuals have really gone down since TRAIN,” Dominguez said.

“In fact, for VAT purposes, they will be exempted from VAT if their gross receipts do not exceed P3 million,” he added.

The finance chief also added that online sellers’ unpaid taxes for their unreported sales in the past will be waived once the proposed general tax amnesty, now pending in Congress, is passed into law.

“If they have any tax liabilities that are unpaid for prior periods, then they certainly can be covered by a general tax amnesty. That is why we are still asking Congress to pass the legislation on tax amnesty,” Dominguez said.
In its June 1 RMC No. 60-2020, the BIR was reminding all persons doing business and earning income through digital means to ensure that their businesses are registered, or their registrations are updated.

However, the RMC drew backlash from the public, saying the circular would just burden and not help small entrepreneurs who are trying to cope with an economy crippled by the pandemic.

But Finance Undersecretary Antonette C. Tionko clarified that RMC No. 60-2020 is not intended to go after online merchants who have unreported sales or unpaid taxes.

She explained the latest RMC only contains basic registration guidelines for online business owners.

“We just want to encourage those who are engaged in online businesses to register with the BIR,” said Tionko, who also heads the DOF Revenue Operations Group.

This is not the first time the BIR initiated a campaign on digital transactions. In 2013, the tax agency had issued RMC No. 55-2013 reminding taxpayers that online businesses are not treated differently from brick-and-mortar businesses.

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