REPUBLIC

OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Quezon City October 22, 2012

SUBJECT : Reiterates Taxpayers Obligations in Relation to Online Business Transactions TO : All Internal Revenue Officers, Employees and Others Concerned. ______________________________________________________________________________ With the advent of newer and faster technologies, and the advancement in the commercial use of the world wide web, the internet has become the vogue medium not only for business advertisements but for the conduct of retailing which has given way to the significant growth of the virtual shopping mall or on line marketplaces/web stores. A lot of consumers are visiting said sites, and are doing their shopping online primarily because of its high level of convenience since shopping can be done within the confines of the home, office or internet cafe. In view of the volume of online shoppers which spun the industry into a big business, it has become imperative to remind the parties in the internet business transactions of their tax obligations, hence this circular. For better understanding of the electronic business industry, the following are some of the significant types of online transactions: 1. Online shopping or online retailing - a form of electronic commerce whereby consumers directly buy goods or services from a seller over the Internet without an intermediary service. An online shop, eshop, e-store, Internet shop, webshop, webstore, online store, or virtual store evokes the physical analogy of buying products or services at a bricks- and-mortar, retailer or shopping center. (source: Wikipedia) 2. Online intermediary service - An intermediary (or go-between) is a third party that offers intermediation services between two trading parties. The intermediary acts as a conduit for goods or services offered by a supplier to a consumer. (source: Wikipedia) Consumers buy goods or services from an intermediary service provider who receives commission from the merchant/retailer. 3. Online advertisement/classified ads (transactional fee) - Online advertising is a form of promotion that uses the internet and world wide web to deliver marketing messages to attract customers. (source: Wikipedia) The first advertisement is sometimes given for

REVENUE MEMORANDUM CIRCULAR NO. _______

free for some advertisement websites and the succeeding advertisement is subject for transactional fee. 4. Online Auction - virtual auctions on the internet. The seller sells the product or service to the person who bids the highest price. For sellers, online auctions open up new sales channels for new products and offer buyers favorable purchasing conditions. (source: entrepreneur.com) Those into electronic business, just like any other business establishments, have the obligations to: Register the business in the Revenue District Office (RDO) having jurisdiction over the principal/head office by accomplishing BIR Form 1901 (for individuals) or 1903 (for corporations or partnerships), and pay the registration fee to any Authorized Agent Bank located within the RDO. A BIR Certificate of Registration shall be issued by the RDO, reflecting therein the tax types required of concerned taxpayer for filing and payment, which shall be displayed conspicuously in the business establishment. Secure required Authority to Print (ATP) invoices/receipts and register Books of Accounts for use in business. a. Manual Books of Accounts, booklets of invoices/receipts b. Computerized Accounting System (CAS) and/or its components including e-Invoicing System Issue registered invoice or receipt, either manually or electronically, for every sale, barter, exchange, or lease of goods and properties as well as for every sale, barter, or exchange of services. Said invoice or receipt shall conform to the information requirements prescribed under RMC 62-05, and shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. Keep Books of Accounts and other business/accounting records within the time prescribed by law, and such shall be made available anytime for inspection and verification by duly authorized Revenue Officer/s for the purpose of ascertaining compliance with tax rules and regulations. File applicable tax returns, pay correct internal revenue taxes, and submit information returns and other required tax compliance reports. A matrix on the invoicing process for the different modes of online business transactions (Annex A) is hereby attached to serve as a practical guide for the different parties of the said transactions. All concerned are hereby enjoined to be guided accordingly. KIM S. JACINTO-HENARES Commissioner of Internal Revenue