2022 BIR Registration and Tax Compliance for Online Businesses

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If you engage in any form of business online, you are required to register and pay your taxes. Any professional tax and accounting services in the Philippines will tell you that paying your tax dues are an obligation for any form of income that falls within the parameters set by the BIR. Find out more about BIR registration and tax compliance for your online business.

Defining an Online Business

According to BIR, any person or company that uses the internet to generate income is an online business. Note that occasionally selling goods online for the purpose of decluttering is not considered a business, such as selling your old car every few years online.  Online Business pertains to the following:

  • online sellers
  • delivery channels
  • internet service providers
  • online payment gateways
  • facilitators of other online transactions

The Requirements for Registering Your Online Business with BIR

All micro-enterprises are mandated to register with BIR so seeking help from tax services in Manila could be in your best interest. Non-compliance with this regulation means having your business closed in no less than five days and you will have to pay certain fines/penalties too.

To register your business, you need to go to the RDO or Revenue District Office. There are requirements you need to prepare and these are the following:

  1. Accomplished BIR Form No. 1901
  2. Valid Identification Documents – birth certificate, Passport, Postal ID, Driver’s License, etc.
  3. DTI Certificate of Registration-If you don’t have one, get one on their online registration page.
  4. Occupational or Professional Tax Receipt from the City or Municipal Hall (only if applicable)
  5. Barangay Clearance
  6. Proof of Address – Lease Contract, Lan Title, etc.

The Mayor’s Permit is not required anymore which means that you can concurrently process your LGU requirement based on the BIR order.

How to Register Your Online Business

  1. Go to the nearest Revenue District Office
  2. Fill out BIR Form 1901 (2 copies)
  3. Present all your requirements for registration to the BIR Client Support Officer or CSO so they can review your registration requirements. This also includes:
  4. If your registration requirements have been verified, you may now proceed to the counter for New Business Registrant where you pay the P500 annual registration fee and P30 Documentary Stamp Tax.
  5. You will receive the following after you have complied with all the requirements:
  6. BIR Certificate of Registration/BIR Form No. 2303
  7. Copy of BIR-Stamped Form No. 1901 together with your TIN if you haven’t been issued a TIN before)
  8. Notice to Issue Receipt/Invoices and Book of Accounts
  9. Proof of Payment for the DST and Annual Registration Fee 

Figuring Out How Much Taxes You Must Pay

If your online business has an income of less than 250,000 in your gross annual sales, you don’t have to pay income tax however, you are still required to register your business, which gives you certification and allows you to issue official receipts.  You can seek help from tax and audit services in Pasig that provides business registration services.

However, if your online business has a gross sale that does not exceed P100,000 during the fiscal year, then you are considered a marginal income earner.  Register with the BIR as a marginal income earner so you can avail of the following tax implications:

  • Exempted from creating books of accounts and issuing receipts
  • Excluded from audited financial statements
  • 12% VAT Exemption
  • Exempted from payment of expanded withholding tax on sales

If your online business is worth less than P3 million, you can register as a Barangay Micro Enterprise at DTI and BIR to avail of these benefits:

  • Exempted from Income Tax
  • Liability for 12% VAT
  • Excluded from audited financial statements
  • If your employees get the same benefits, you will be exempted from the minimum wage law
  • Government financial assistance and training programs will be accessible

Online sellers are still required to pay taxes for their e-commerce activities when they reach a certain level of income, and these are the following:

  • Monthly and quarterly VAT (income more than P3 Million a year)
  • Quarterly VAT (income less than P3 Million a year)
  • Monthly remittance for Withholding tax on compensation 
  • Annual and Quarterly Income Tax

If you are not VAT registered and you earn more than P250,000 but less than P3 million, you can choose from either graduated tax or an 8% self-employed tax rate.    

If you are VAT registered and earn more than P3 million in gross sales, you need to pay income tax based on graduated tax rates on your net income.

Researching and studying on your own will keep you informed and educated but when it comes to complex matters like BIR regulations and tax compliance, it’s best for you to get help or be guided by a professional. Seek reputable tax and accounting services in Pasig from our team so we can help your online business stat tax compliant.