Finance Secretary Carlos Dominguez III has directed the Bureau of Internal Revenue (BIR) to form a unit dedicated to track sales of goods done online and to coordinate with their counterparts in other countries to determine how to properly tax digital transactions.
In a statement, the Department of Finance (DOF) said Dominguez told the BIR they should consult with their counterparts in Russia or Korea, to find out how to properly and effectively tax digital transactions.
“We have to catch up with these guys,” Dominguez said, referring to the surge in online sellers as most consumers have turned to buying goods through digital platforms amid the COVID-19 pandemic.
The DOF said BIR Commissioner Caesar Dulay has already discussed with the taxman’s National Investigation Division (NID) how this can be done, initially through a task force that will monitor the sales of goods and services done through the Internet.
Similarly, a proposed measure imposing a 12% value-added tax (VAT) on digital transactions was approved by the House of Representatives on third and final reading.
The proposed House bill seeks to amend Section 105-A of the National Internal Revenue Code with a provision making a non-resident digital service provider, such as Netflix, Spotify, and Lazada, liable for assessing, collecting, and remitting the VAT on the transactions that go through its platform.
The measure defines a digital service provider as “a service provider of a digital service or goods to a buyer, through operating an online platform for purposes of buying and selling of goods or services or by making transactions for the provision of digital services on behalf of any person.”
Meanwhile, apart from online sellers, the BIR is also keeping tabs on the tax compliance of social media “influencers” in the country.
The BIR earlier said it is investigating an initial list of 250 “influencers” to check on their tax compliance.
The taxman said that Letters of Authority (LOAs) for the conduct of investigation were already issued to certain social media influencers found to be “top earners” in their field.
According to the BIR, socmed influencers who earn money from their posts on digital media are classified as self-employed individuals or persons engaged in trade or business as sole proprietors.
Their earnings are generally considered as business income, as defined under BIR’s Revenue Memorandum Circular (RMC) No. 97-2021 issued last August 16, 2021.
Under RMC 97-2021 issued last month, socmed influencers should pay income tax and percentage tax or, if applicable, the value-added tax (VAT), as mandated under the National Internal Revenue Code (NIRC) and other existing laws.
Based on the Circular, socmed influencers are defined as those who derive their income from YouTube Partner Program; sponsored social and blog posts; display advertising; becoming a brand representative/ambassador; affiliate marketing; co-creating product lines; promoting own products; photo and video sales; digital courses, subscriptions, e-books; and podcasts and webinars.
