SOME online sellers in Cebu have described the Bureau of Internal Revenue’s (BIR) new rule, which requires all e-commerce businesses to be registered, as stressful.
Flora Recalde, owner of the registered online store “Flora’s Fashion Boutique,” said that while she supports paying taxes, the new registration process is more complex and time-consuming.
“It took me days to complete everything, and I needed help from an accountant. While I support proper documentation, I wish the process were more streamlined,” she told SunStar Cebu on Wednesday, Sept. 11, 2024.
The BIR issued Revenue Regulations 15-2024, effective Aug. 15, 2024, outlining the guidelines, procedures, and requirements for the mandatory registration of businesses, including both physical retail establishments and online businesses.
This move aligns with Republic Act 11967, or the Internet Transactions Act of 2023, which mandates that all individuals and entities engaged in online trade must comply with the laws and regulations of the countries where their products are marketed.
Last July 15, the BIR also formally imposed last a one-percent withholding tax on gross remittances made by electronic marketplace operators and digital financial services providers to online merchants and sellers.
Josefa Uy, who operates “Homecooked Treats,” has yet to register, citing concerns over the costs and paperwork involved.
“I’m just a small seller, and the whole process seems overwhelming. I’ve been considering it, but seeing others struggle with the new system makes me hesitate,” she said.
Mary Anne Santos, owner of “Savory Delights,” recently completed her registration and described the experience as stressful.
“I recently registered, and honestly, it was stressful. The new requirements are stricter, and there are a lot of documents to submit,” she said.
Under BIR’s new regulations, businesses with an online presence, including those with physical stores, must register their online operations as an additional business name attached to their head office or branch, rather than as a separate branch.
For those solely engaged in online trade without a physical store, registration must be completed at the BIR district office corresponding to the individual’s place of residence or, for juridical entities, the principal place of business registered with the Securities and Exchange Commission.
Online businesses are required to display an electronic copy of their BIR certificate of registration (COR) on their website, digital account, or platform, ensuring it is accessible and visible to customers.
According to the BIR, operators of digital platforms and e-marketplace platforms are also responsible for verifying that all their online sellers or merchants are registered with the BIR. Failure to do so may be considered aiding or abetting in the commission of an offense.
The BIR has the authority to issue closure/take down orders for a minimum of five days to businesses that fail to comply with registration requirements. These orders will be lifted once the BIR confirms that the violations have been rectified and the business has met all necessary registration requirements.
Additional penalties include fines of P1,000 for late registration; P1,000 per business or store name for failure to register; P1,000 per business name for failure to post the COR on the business’s digital platform; P20,000 per establishment for operators of digital platforms that allow unregistered businesses to operate; P20,000 for failure to comply with a closure/take down order.
BIR also imposes fines ranging from P5,000 to P50,000, depending on taxpayer classification, if the e-commerce owner fails to register a head office or branch.
One-percent tax
As for the one-percent tax, it applies to online sellers whose annual gross remittances exceed P500,000.
According to BIR, the tax is levied on one-half of the gross remittances made by e-marketplace operators and digital financial services providers to online sellers.
Online merchants whose annual total gross remittances do not exceed P500,000, or whose cumulative gross remittances in a taxable year have not yet exceeded this amount, are exempt from the tax.
Cooperatives registered with the BIR and holding a valid certificate of tax exemption, as well as sellers subject to a lower income tax rate under existing laws, are exempt.
E-marketplace operators and digital financial services providers are required to withhold the one percent tax from payments made to online sellers and remit it to the BIR on a monthly basis. They must also ensure that all online sellers using their platforms are registered with the BIR.
Operators are obligated to request certification from sellers claiming exemption or a lower tax rate and provide withholding tax certificates (BIR Form 2307) to sellers as proof of withholding.
The obligation to withhold the one-percent tax begins when one of the following occurs:
Receipt of a BIR-received sworn declaration indicating that the seller’s gross remittances have exceeded P500,000;
Failure of the seller to submit the required BIR-received sworn declaration within the prescribed period; and
Determination by the e-marketplace operator or digital financial services provider that the total gross remittances to the seller have exceeded P500,000. / JBB