How to Register Your Online Business and Pay Taxes to BIR
Published: June 26, 2020 | Updated: October 19, 2020 | Posted by: Venus Zoleta | Personal Finance
Online businesses are booming in the Philippines, as more Filipinos have turned to online selling after losing their jobs during the COVID-19 crisis. If you’re one of those financially struggling Pinoys trying to make a living through the internet, you’re likely to be worried about the recent BIR order requiring online sellers to register and pay taxes to the government.
Online business registration and tax payment are mandated by the law, so online sellers and everyone making money online are expected to comply. Reduce your worries by knowing how to do these right.
Here’s everything you need to know and do, from how to register your online business to how to pay your taxes to the BIR.
Table of Contents
Do I Need to Register My Online Business in the Philippines?
According to the Revenue Memorandum Circular No. 60-2020[1], the BIR requires registration for “all persons doing business and earning income in any manner or form, specifically those who are into digital transactions through the use of any electronic platforms and media, and other digital means.”
However, days after issuing the order, the government clarified that not all kinds of online sellers are required to register.
Exempted from the DTI and BIR registration are those selling products “intermittently or irregularly” and those selling homemade items as a hobby. According to the DTI, they consider such online sellers to be not in business yet, so they don’t need to register.
Therefore, you have to register your business if you’re earning money regularly through any online means even if your business is small. The latest BIR memo covers not just online sellers but also other people who make money online such as freelancers, YouTubers, and bloggers.
Online businesses in the Philippines have until July 31, 2020 to register and settle any tax due. Failure to register by the deadline can lead to penalties for late registration.
Related:
- Know Your Taxes: Basics of Tax in the Philippines
- What Happens If I Don’t Pay My Taxes? Tax Evasion Penalties Every Taxpayer Must Know
Benefits of Online Business Registration
Online business registration may be a burden in terms of money, time, and effort, but it can actually help you grow your business.
Here’s why registration with the DTI and BIR is good for your business:
1. Increase Your Customers
If your online business is registered, it means your operation is legitimate. People are more likely to trust and buy from registered online sellers who comply with the law and won’t scam them.
Also, if you’re planning to sell on Lazada and Shopee to boost your sales, these e-commerce websites will require you to submit business registration documents from the DTI and BIR.
Related:
- Make Money Online: How to be a Shopee or Lazada Online Seller
- Online Business Ideas You Can Start Even with Small Capital
2. Qualify for Business Loans
Need additional funds for your working capital? You might need to apply for a loan someday to cover some of your business expenses.
Formal lenders like banks require DTI certification, BIR certificate of registration, and income tax returns (ITRs) from borrowers who are self-employed or entrepreneurs. You can only have these documents once you register your business.
Related: Business Loans for Startups in the Philippines
3. Receive Government Assistance
Being registered makes your online business eligible for government assistance programs during a national crisis like the COVID-19 pandemic. Only registered businesses in the Philippines can avail of cash aids or loans for micro, small, and medium enterprises from different government agencies.
Related: 5 Ways to Save Your Small Business from a Pandemic
How to Register Your Online Selling Business
DTI Online Business Registration
As a single proprietor, you have to register your online business name first with the DTI before you register with the BIR.
Good thing, it’s easy and quick to apply for DTI business registration online through the Business Name Registration System (BNRS)[2]. For the requirements and steps, check out this DTI business registration guide.
BIR Online Business Registration
Instagram photo by @gellaumbrella
After you’ve secured a certification from the DTI, you can now register your online business with the BIR.
However, the BIR has no online registration system yet. To register your online business with the BIR, you have to personally do that at the Revenue District Office (RDO)[3] with jurisdiction over the area where you live.
BIR Online Business Registration Requirements
- Accomplished registration form (BIR Form No. 1901)[4]
- Valid ID (e.g., birth certificate, passport, driver’s license, etc.)
- DTI Certificate of Registration
- Annual registration fee (PHP 500)
- Documentary stamp tax (PHP 30)
Note: The business permit/mayor’s permit is no longer required. The BIR issued an order [5] on June 9, 2020 removing the mayor’s permit from the list of requirements to streamline the process of business registration.
How to Register Your Online Selling Business with the BIR
- Go to the RDO having jurisdiction over your place of residence.
- Fill out two copies of BIR Form No. 1901. Under “Taxpayer Type,” choose the item that applies to you:
- Single Proprietorship Only: If online selling is your sole source of income
- Professional and Single Proprietor: If you’re an online seller who also practices a profession (e.g., engineer, accountant, dentist, etc.)
- Mixed-Income Earner – Compensation Income Earner & Single Proprietor: If you’re an employee with online selling as a sideline or raket
- Mixed-Income Earner – Compensation Income Earner, Single Proprietorship & Professional: If you’re an employee who also sells online and practices a profession
- Present the business registration requirements to the BIR officer.
- Proceed to the New Business Registrant Counter to pay for the registration fee and documentary stamp tax.
- Secure BIR-printed receipts (BPR) / BIR-printed invoices (BPI) or the Authority to Print (ATP).
- Receive the following documents from the BIR:
- Certificate of Registration (BIR Form No. 2303)
- Your copy of BIR-stamped Form No. 1901 with your TIN (if you were not issued with a TIN)
- Notice to Issue Receipt/Invoice
- BPR/BPI or ATP
- Proof of payment of registration fee
How to File Your Income Tax Return
Once your online business is registered, one of the things you need to do is to file the required tax returns with the BIR. The types of taxes you’re required to file and pay are indicated on your BIR Certificate of Registration.
The usual tax returns[6] that online businesses file are BIR Forms 1701 (or 1701A) and 1701Q. When filling out these ITRs, you must declare all the income you’ve earned and any taxes due for the current year (plus those from previous years if you’re newly registered). Then you file them with the BIR online through its eFPS or eBIRForms facility.
Deadlines for filing ITR
- BIR Form No. 1701/1701A – April 15 of each year covering income for the previous year (except for the taxable year 2019, which deadline was extended from April 15 to June 14, 2020)
- BIR Form No. 1701Q
- 1st quarter – May 15 of the current year
- 2nd quarter – August 15 of the current year
- 3rd quarter – November 15 of the current year
As an online seller, freelancer, blogger, or YouTuber, it’s important to know if you’re exempted from paying taxes.
Under the TRAIN law, online businesses earning less than PHP 250,000 per year (or less than PHP 20,833.33 per month) do not have to pay income tax. Also, those making less than PHP 3 million per year (or less than PHP 250,000 per month) are exempted from paying the value-added tax (VAT).
However, even if you’re exempted from paying taxes in the Philippines, you are still required to register your business and file tax returns with the BIR.
Read more: How to File an Income Tax Return in the Philippines: Guide for Freelancers and Entrepreneurs
How to Pay Tax for Online Business in the Philippines
Like other types of taxpayers, online businesses should pay the correct taxes on time. It’s easy to comply with this rule nowadays, as the BIR offers several convenient online methods for tax payment.
You can pay your taxes via your bank’s online or mobile banking channel, GCash app, or PayMaya app. BancNet ATM/debit cardholders can pay through the LANDBANK Link.BizPortal or DBP Pay Tax Online (which also accepts Visa/Mastercard credit cards).
Read more: BIR Online Payment Guide: Easy Ways to Pay Taxes in the Philippines
Final Thoughts
Remember to take extra caution when you apply for online business registration at the BIR office, as many other online sellers will be transacting there at the same time. Wear your face mask, bring a hand sanitizer, and observe a one-meter distance from other people around you.
When you register your business, also keep in mind the other rules you have to follow as a taxpayer:
- Issue registered official receipt or sales invoice per sale of goods or services
- Keep registered books of accounts and other records of business transactions
- Pay the PHP 500 annual registration fee on or before January 31 of each year
Sources:
- [1] BIR Revenue Memorandum Circular No. 60-2020
- [2] DTI BNRS
- [3] BIR RDO Directory
- [4] BIR Form No. 1901
- [5] Revenue Memorandum Circular No. 57-2020
- [6] BIR Income Tax Return Forms
Venus is the Head of Content at Moneymax, with over 15 years of combined experience in digital marketing, corporate communications, PR, and journalism. She invests in stocks, mutual funds, VUL, and Pag-IBIG MP2. Outside of work, she’s crazy about cats and Korean dramas. Follow Venus on LinkedIn.
