WE LIVE IN A TIME where everything can be accessed through the World Wide Web. With the use of high-tech gadgets, phones are no longer used for mere communication, but also for different transactions such as online banking, online shopping and the like. In keeping with the advances in technology, the government has also updated its laws and regulations to govern these kinds of online transactions.
A good example is Revenue Memorandum Circular No. 55-2013 issued by the Bureau of Internal Revenue (BIR). This circular reiterates taxpayers’ obligations in relation to online business transactions. In issuing the circular, the BIR recognizes that an increasing number of consumers are visiting and buying goods and services from online stores primarily because of the high level of convenience inherent in online shopping.
The circular enumerates the most common types of business transactions in the Philippines: online shopping or online retailing, online intermediary service, online advertisement/classified ads, and online auction.
Online shopping or online retailing is defined as a form of electronic commerce where consumers directly buy goods or services from a seller over the Internet without an intermediary service.
Online intermediary service is defined as one where an intermediary acts as a conduit for goods or services offered by a supplier to a consumer, and receives a commission. The relationship between the intermediary and the merchant is that of a principal-agent.
Online advertisement/classified ads is a form of promotion that uses the Internet to deliver marketing messages to attract customers.
Online auctions are conducted through the Internet via an online service provider that specifically hosts such auctions where the seller sells the product or service to the person who bids the highest price.
The circular emphasizes that there must be a similar tax treatment on purchases (local or imported) and sale (local or international) of goods (tangible or intangible) or services, with no distinction on whether or not the marketing channel is the Internet/digital media or the typical and customary physical medium.
Like any other business establishment, persons who conduct business through online transactions have the obligations to: (1) Register the business at the Revenue District Office (RDO) that has jurisdiction over the principal place of business (or residence, in case of individuals) and pay the registration fee to any authorized agent bank located within the RDO; (2) secure the required authority to print invoices and receipts and register books of accounts for use in the business; (3) issue registered invoices or receipts, either manually or electronically; (4) withhold required creditable or expanded withholding tax, final tax, tax on compensation of employees, and other withholding taxes; (5) file applicable tax returns on or before the due dates, pay correct internal revenue taxes and submit information returns and other tax compliance reports; and (6) keep books of accounts and other business and accounting records within the time prescribed by law.
There are also different obligations involved for the online merchant or retailer in the sale of goods and services. In general, if payment is made through a credit card company, the online merchant is obliged to issue electronically the BIR-registered invoice or official receipt for the full amount of the sale to the buyer, issue an acknowledgment receipt to the credit card company for the amount received, and pay the commission of the credit card company net of 10% expanded withholding tax. If payment is made through the banks, the online merchant is obliged to issue an invoice or official receipt to the buyer for the payment of the goods and services, and issue an acknowledgment receipt to the bank for the amount received. For cash on delivery or pick-up by the customer, the online merchant is required to issue electronically or manually the BIR-registered invoice or official receipt for the full amount of the sale.
The circular likewise enumerates the different obligations and duties of the buyer or customer and payment gateways, namely credit card companies and banks.
Finally, the circular reminds taxpayers that any person engaged in Internet commerce who fails to comply with applicable tax laws, rules and regulations shall be subject to the imposition of penalties provided for under the existing laws, in addition to the imposition of penalties under the National Internal Revenue Code of 1997.
Germaine Lee Chua is an associate of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
glchua@accralaw.com
source: Businessworld
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