Worried about online selling tax in the Philippines? Find out everything you need to learn here so you can ensure your business is covered!
E-commerce has grown rapidly in the Philippines, spurred by the spike in demand during the pandemic. This boom has led to a remarkable increase in the number of online sellers, more than doubling the figures forecasted by the Department of Trade and Industry (DTI).
As a result, more individuals and businesses are turning to online selling, finding it a viable supplement or even replacement for physical stores. However, the low barrier to entry also means many enter this space without essential knowledge about a crucial business element: taxation.
Understanding the basics of online selling tax in the Philippines is vital to ensure compliance, avoid potential legal headaches down the line, and maintain healthy growth.
According to Philippine tax laws, online selling includes any business activity conducted over the internet. This definition covers various platforms such as e-commerce websites, social media marketplaces, and online marketplaces like Shopee and Lazada. If you sell physical goods, digital products, or services online, you are considered an online seller.
Here are five indispensable pieces of information about how to handle the taxes on online sellers and businesses in the Philippines.
Who needs to register? Well, basically everyone. Any individual or entity engaged in online selling must register with the BIR. This includes businesses of all sizes, whether you’re a small seller on social media or a large e-commerce brand. As previously mentioned, you may also have to register for VAT if your business performs well enough.
Here’s a step-by-step guide:
1. Fill out BIR Form 1901 or 1903, depending on whether you’re an individual or a corporation.
2. Submit the required documents, including valid ID, proof of address, birth certificate, DTI registration or Securities and Exchange Commission (SEC) registration, and other listed documents.
3. Pay the registration fee, which is usually PHP 500.
4. Receive the Certificate of Registration (COR) after processing.
You can fill in forms and submit them online, via BIR eServices, or physically at any Revenue District Office (RDO).
Accurate records are absolutely necessary for online sellers because you, as the owner, are responsible for filing and reporting for most, if not all, types of taxes for your online shop in the Philippines.
Keep detailed and organized records of income, expenses, and sales transactions to make tax season less of a bother. You can also take advantage of accounting software like QuickBooks or Xero to streamline your tax compliance efforts.
The BIR has specific deadlines for filing taxes, such as quarterly and annual income tax returns. Missing these deadlines can create unnecessary expenses in the form of penalties and interest. It can also damage your business credit, making it more difficult to get favorable loan terms.
Set reminders using digital calendars or reminder apps to keep track of important deadlines. Also, keeping your tax-related documents in an organized system can help ensure you can file promptly and don’t miss any financial documents during tax season.
Once your business gets large enough, it may make more financial sense to get professional assistance for tax planning and compliance. Certified tax accountants can help you develop tax-efficient strategies, ensure compliance, and address specific tax concerns.
They are also much more experienced in handling tax regulations, saving you time and potentially reducing your liabilities.
Many online sellers mistakenly believe they are exempt from taxes if their income is below a certain threshold. However, all income still needs to be reported, even if you’re in the lowest tax bracket.
Some may also misunderstand what constitutes eligible tax deductions, which can lead to unintentional tax violations. It’s best to take the time to research what counts to avoid getting potential cases brought up.
Online selling can be a very profitable source of income, but as much as everyone may wish otherwise, taxes are unavoidable. That’s why the best approach you can take is learning how best to handle them. Proper handling of taxes minimizes their burden and ensures your activities remain compliant and sustainable, allowing you to focus on growing your business.
Originally published on J&T Express’ blog.
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