With the COVID-19 continually affecting livelihoods of all walks of life, businesses are pushed to go online, while others begin small ventures to survive.
In July 2020, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 60-2020 (RMC for short) requiring online businesses to register with the BIR and pay taxes on or before July 31 (This has since been extended to August 31). These online businesses include:
- Online sellers, especially those selling tobacco and alcohol
- Online subscriptions
- Bloggers, vloggers, and other content creators earning from advertising
- Ride-hailing services
When the BIR announced this, many people heavily reacted online. What about the small and amateur businesses that popped up during the quarantine period? Do they have to register and to pay taxes as well?
WHO PAYS THE PRICE?
Legal firm SKY Law points out that only those subject to tax are required to register with the BIR under the Tax Code and pertinent BIR regulations. In the Philippines, only the following are always subject to income tax and are always required to register: (1) partnerships, (2) corporations, and (3) non-resident aliens staying in the Philippines for 180 days or less per year.
For all other individual taxpayers, registration will depend on two things: (1) your gross sales; and (2) your net income. “Under the TRAIN Law, if your gross sales are P500,000.00 or below, you are exempt from both VAT and percentage tax,” SKY Law further explains, continuing, “On the other hand, your net income must be P250,000 or below for you to be exempt from income tax.” In other words, people are only required to register with the BIR if your gross sales are more than P500,000, and your net income is more than P250,000.
SKY Law advises that for your own protection, make sure to keep an accurate record of your sales and costs, including keeping messages, texts, emails, and receipts.
For those not sure about their gross sales and net income, or those who want to play it safe, voluntary registration with the BIR is welcome. Registering, however, is only the beginning, as you will have to later comply with several obligations:
- Tax returns must be regularly filed, whether a tax is due or not. Failure to file is subject to a penalty of at least P1,000.
- Issue receipts for transactions valued at P25.00 or higher. Failure to issue a receipt is a criminal offense.
- Lastly, properly fill out your books of account.
CHiNOY TV and SKY Law hope that this sheds light on the taxation of businesses by the BIR.