Following the Bureau of Internal Revenue’s (BIR) mandate urging online sellers to register their businesses and settle their taxes not later than July 31, The Department of Trade and Industry (DTI) clarifies that sellers operating on an intermittent or irregular basis as well as those selling homemade items as a hobby are not obliged to register.
“At any rate, the rule basically applies to those in business regularly selling even if such activity is small in size, it must be registered. Anyway, the annual income below P250,000 is exempted from the income tax according to the BIR ruling. If one is just selling intermittently or on an irregular basis or selling homemade stuff as a hobby, it is understood they are not yet in business thus they are not required to register,” says DTI Secretary Ramon Lopez. However, the trade secretary did not elaborate on what counts as an “irregular basis” for online businesses.
Lopez emphasizes that registering businesses is key to consumer protection which shall provide greater traceability and increase consumer confidence in online transactions. Granted that e-commerce is taking the lead in the current climate of the industry, even seen to revitalize the country’s economy, online businesses are expected to grow and so business registration will be beneficial in the future.
“We believe that eventually, these unregistered businesses will register as they grow in size sooner or later, they would have to borrow from formal lending institutions that will require registered audited financial statements or if they get to serve larger establishments, official receipts for their sales will be required, thus they would have to be registered,” Lopez says.
BIR’s Memorandum Circular 60-2020 states that “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” are reminded “to ensure that their businesses are registered pursuant to the provisions of Section 236 of the Tax Code, as amended, and that they are tax compliant.”
The BIR also made it clear that the memorandum is not directed towards small business owners, which means income taxes will not be collected from entrepreneurs earning an annual amount of P250,000 or less.
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