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.
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According to the Revenue Memorandum Circular No. 60-2020, 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.
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:
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.
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.
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.
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). For the requirements and steps, check out this DTI business registration guide.
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) with jurisdiction over the area where you live.
Note: The business permit/mayor’s permit is no longer required. The BIR issued an order  on June 9, 2020 removing the mayor’s permit from the list of requirements to streamline the process of business registration.
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 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.
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.
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).
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: