In the past number of days, there has been much talk about the recent BIR Circular – Revenue Memorandum Circular No. 60-2020 and what it means for online/digital businesses in the Philippines.
The Circular provides 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 within the coming weeks.
We previously wrote about Tax Compliance for Online Transactions in the Philippines. In this article, however, we examine the new BIR Circular and outline what it means for businesses conducting digital transactions.
Why is everyone now talking about online/digital businesses?
The purpose of the Circular is 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 states 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 does the BIR Circular require exactly?
RMC No.60-2020 requires relevant companies and individuals to register their business, or to ensure that their existing business registration status is fully updated, with the BIR no later than 31 July 2020.
These businesses are also encouraged to voluntarily declare previous business transactions and file and pay the relevant taxes in relation to such historic transactions.
If businesses comply with the above no later than 31 July 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 with the above requirements by 31 July 2020, they shall be subject to all applicable penalties under law, which shall include existing BIR rules and regulations.
Additional BIR Requirements
Within the Circular, the BIR also urges businesses, newly registered and previously registered, to comply with other existing requirements under the Tax Code (as amended) and all other BIR issuances. In the Circular, the BIR refers specifically to the following requirements with which businesses in the Philippines must 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 includes an Annex (Annex A) which outlines 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 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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