In June 2020, the BIR provided notice to businesses in the Philippines that engage in online/digital business transactions that they must a) be registered with the BIR and b) ensure they are up to date on their tax compliance obligations before a particular deadline date.
This notice was provided through Revenue Memorandum Circular No. 60-2020. The BIR has since extended the deadline for registration two times!
We previously wrote about Tax Compliance for Online Transactions in the Philippines. In this article, however, we examine three recent BIR Circulars and outline what they mean for businesses conducting digital transactions in the Philippines.
Why is everyone now talking about online/digital businesses?
The purpose of the Circular was to give notice to persons and businesses earning income and that do business by way of online or digital transactions, to ensure that a) their businesses are registered with the BIR in accordance with Section 236 of the Tax Code of the Philippines (as amended) and b) that they are fully tax compliant.
What are “digital transactions”?
The BIR Circular focuses on businesses that are “into digital transactions through the use of any electronic platforms and media, [and] any other digital means.”
The BIR Circular also stated that this will include all stakeholders in the online business space. Examples provided by the BIR in the Circular include partner sellers/merchants, payment gateways, delivery channels, internet service providers and other types of digital/online facilitators.
What are the BIR registration requirements?
RMC No.60-2020 required relevant companies and individuals to register their business, or to ensure that their existing business registration status was fully updated, with the BIR no later than 31 July 2020.
Deadline Extended to 31 August
At the end of July 2020, the BIR released a subsequent memorandum – Revenue Memorandum Circular No. 75-2020. In RMC No. 75-2020, the BIR noted that online merchants needed additional time to comply with RMC No. 60-2020 due to COVID-19 affecting regular business operations, transport, bank branches, etc. So – the BIR extended the deadline date to 31 August 2020.
Deadline Extended to 30 September
The deadline has just recently been extended again!
Revenue Memorandum Circular No. 92-2020, dated 1 September 2020, has extended the deadline for registrations and registration updates to 30 September 2020.
According to the BIR, the reason for the latest deadline extension is due to the surge of registrants across the country trying to beat the deadline, combined with the BIR’s resource constraints during the pandemic.
If businesses comply with the above no later than 30 September 2020, the BIR will not impose penalties on these businesses for late registration or late tax filings/payments.
If, however, covered businesses do not comply by 30 September 2020, they shall be subject to all applicable penalties under law, which includes existing BIR rules and regulations.
Businesses are also encouraged to voluntarily declare previous business transactions and file and pay the necessary taxes relating to any such historic transactions.
Additional BIR Requirements
Under RMC No.60-2020, the BIR also urged businesses, newly registered and previously registered, to comply with other existing requirements under the Tax Code (as amended) and all other BIR issuances. In RMC No. 60-2020, the BIR referred specifically to the following requirements with which businesses in the Philippines are already required to comply:
- Issuing of registered Sales Invoices or Official Receipts for every sale of goods or services to a client, customer or purchaser.
- Maintaining registered Books of Accounts and other accounting records.
- Compliance with the Withholding Tax framework in the Philippines.
- Filing and payment of all required tax returns on time. Remember, the taxes that a business is required to pay will generally be listed on the company’s BIR Form2303, commonly known as the Certificate of Registration.
Guidelines to help businesses register with the BIR
RMC No.60-2020 included an Annex (Annex A) which outlined the basic guidelines for businesses to apply for registration. We have summarized the requirements below. However, you can also check out the specific requirements here in Annex A of RMC No.60-2020.
Registrations or updates of registrations can be processed in the Revenue District Office (RDO) where the registered office of the business is located or will be located.
In order to register with the BIR and obtain a BIR Certificate of Registration, businesses must, at a minimum, first comply with the following requirements:
- Complete the Registration Form. For Corporations/Partnerships, the relevant form is BIR Form No.1903. For Individuals/Sole Proprietorships, it will be BIR Form No.1901.
- Present a government-issued ID. For Corporations/Partnerships, this may include the SEC Certificate of Incorporation, Certificate of Recording or Licence to Do Business in the Philippines. For Individuals/Sole Proprietorships, this may include a Birth Certificate, Passport, Driver’s License, etc.
- Provide additional required documents. For Corporations/Partnerships, this may include Articles of Incorporation or Articles of Partnerships. For Individuals/Sole Proprietorships, this may include the DTI Certificate (for business name).
- Pay the BIR registration/application fee. This will be P500 for the Registration Fee and P30 for the Documentary Stamp Tax.
- Secure BIR Printed Receipts/BIR Printed Invoices or the Authority to Print.
Once the above requirements have been complied with and completed, the taxpayer should receive the following:
- Certificate of Registration (BIR Form2303)
- A copy of the BIR-received Registration Form (BIR Form 1901 or BIR Form 1903)
- Notice to Issue Receipt/Invoice, BIR Printed Receipts, BIR Printed Invoices or Authority to Print (depending on the applicant’s requirement)
- Proof of payment of the registration fee.
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