The COVID-19 pandemic has taken a significant toll on economies and people of all nations and of all ages, from all walks of life, across the globe.

Social media and virtual meetings, domestically and across the globe, have become the “new normal” as people strive to keep normalcy in their lives amid pandemic restrictions. Here in the Philippines, Digital 2020 April Statshot report by Hootsuite and We Are Social revealed that 64% of Filipino internet users are spending more time on social media, with 23% indicating an increased activity in their online shopping activity.

With consumers resorting more to online shopping amid pandemic restrictions, entrepreneurs have embraced the digital phenomenon for online shopping even more. E-commerce websites such as Lazada and Shopee are at the forefront of these online shopping platforms with expected surges in sales revenues in millions of pesos. Technology has already transformed online business transactions into an infinite marketplace where conducting business has become more convenient and efficient for both vendors and vendees. The COVID-19 pandemic has made this marketplace a more obvious necessity.

With this surge in online sales and business activity, the government looks to remind online sellers of their tax obligations, with the Bureau of Internal Revenue’s (BIR) issuance of Revenue Memorandum Circular (RMC) No. 60-2020 entitled “Obligations of Persons Conducting Business Transactions Through any Forms of Electronic Media and Notice to Unregistered Businesses.”  The Circular basically mandates all business owners who are engaged in an online business platform in any form, whether digital or electronic, to register their businesses with the BIR and pay taxes on their sales.

Under this RMC, online business entities and constituents are encouraged to register their businesses no later than July 31, 2020 to avoid penalties for late registration. In addition, they are encouraged to voluntarily declare their past transactions, and pay the taxes due thereon, without corresponding penalties if the declaration is done no later than July 31, 2020.

The above Circular is explicit that it covers not only partner sellers, but also other stakeholders, such as the payment gateways, delivery channels, internet service providers, and other facilitators. Do note that if online sellers are already registered with the BIR, but were not previously doing business online, these online sellers should revise their certificates of registration (with the BIR), to include “online selling”.

The Department of Finance (DOF) and the BIR were quick to explain that this RMC is a reminder to register, and pay the appropriate taxes due, referring to RMC No. 55-2013, dated 05 August 2013. Given this reference, it would be best to review RMC No. 55-2013.

Revisiting RMC No. 55-2013 reveals that online sellers and other facilitators of online trading have different functions and responsibilities. Individuals who have obligations relative to online business transactions are not limited to those who are e-commerce business owners that possess websites and sell their goods and services online, but it includes those “online intermediaries” who are third parties that offer intermediation services between the online sellers and buyers. The intermediaries receive commissions as they act as channels for goods or services offered by a supplier to a consumer. The relationship between the intermediaries and the online sellers is akin to that of principal-agent relationship. All considered, their obligations and duties to different types of online transactions are entirely different. And what are online transactions? RMC No. 55-2013 refers to the following as the more common online transactions: (A) online shopping or retailing, involving consumers directly buying goods or services from a seller over the internet without an intermediary service; (B) online intermediary service, involving an intermediary/third party offering intermediation services between two trading parties (as discussed above); (C) online advertisement/classified ads, involving a form of promotion that uses the internet to deliver marketing messages to attract customers, and (D) online auctions, which are auctions conducted through the internet via an online service provider that specifically hosts such auctions.

RMC No. 55-2013 likewise provides for more detailed instructions on the obligations of the parties to online transactions with regard the issuances of ORs, depending on the manner of payment to the online seller, whether it be through cash on delivery, through bank deposits, or through credit cards. These instructions likewise consider the details of the abovementioned online transactions.

Finally, RMC No. 55-2013 details the BIR administrative obligations of parties to online transactions as: (1) registration with the BIR; (2) securing the required Authority to Print (ATP) invoices/receipts and register books of accounts for use in business; (3) issue the required invoices or ORs, manually or electronically; (4) withhold the applicable taxes and remit the same to the BIR; (5) file applicable tax returns on or before the due dates, pay correct internal revenue taxes, and submit information returns and other tax compliance reports; and (6) keep books of accounts and other business/accounting records within the time prescribed by law. These obligations are generally restated in RMC No. 60-2020.

Given the lack of details in RMC No. 60-2020, and the public outcry the RMC has generated, maybe the BIR can consider the following to clarify this reminder: (a) issue an extension of the deadline for registration; (b) provide specific details on income tax and value-added tax exemptions, and the qualifications for exemptions, whether it be in the Tax Code or in special laws, like the Barangay Micro Business Enterprises (BMBEs) Act of 2002; (c) reiterate the specific obligations with regard the issuance of invoices/ORs, so that all parties to online transactions will be informed, and (d) the specific requirements for filing of the various returns. Surely, the just enforcement of tax laws merits the detailed clarification of the laws, rules and regulations imposed on taxpayers.

_{Renz Homer S. Arreola is a Supervisor from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.}

_{This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.}

_{The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-inquiry@kpmg.com or rgmanabat@kpmg.com.}