No Payment of Tax on Your Online Business in the Philippines

Most Filipinos today are into online selling because most of them lost their jobs or their company temporarily closed because of this pandemic. Some of them are into the sale of items, foods, services, and others. Online business registration Philippines, why does it matter to you?
If you’re reading this, you’re one of those who are into selling stuff. On June 1, 2020, the government issued a memorandum requiring all persons conducting business online should register to the Bureau of Internal Revenue (BIR) before the set deadline to avoid penalties.

This memorandum includes those freelancers, online teaching, YouTubers, internet service providers, and other facilitators (RMC 60-2020). Many online business entrepreneurs are asking many questions. Some of these questions are: Should I Register My Online Business? How to register in the BIR? What are the requirements for BIR registration? Mostly, you’re interested in answering this question, “How much should I pay a tax on my Online Business?

Before we continue why you should register your business, make sure to have your own TIN number. If you don’t have yet your TIN number. Read on how to get tin number.

Why Should You Register Your Online Business?

Consider these three (3) reasons why register your online business in the Bureau of Internal Revenue (BIR) if you’re still wondering.

Helps Build Customer’s Trust

Buyers are more confident to buy their products for those who are a legitimate business and who have a trustworthy brand. One way is to have the Certificate of Registration (COR) issued by the Bureau of Internal Revenue (BIR).
Having this legal document will help you attract more customers to buy your products or services. So, secure this document if you want to have more online customers.

Helps to Avoid Scams

Once your online business is legally registered in the BIR, the government can protect you from online scams. Having protection from the government will feel you secure and your business.

Save Money

Online businesses registered will save money from paying penalties and fees. If your online business is not yet registered, don’t wait to pay late to avoid too many expenses and liabilities. Once you’re logged, you are also entitled to government assistance.
Remember, penalties and fees will cost you more than processing your online business for registration. Read: how to avoid penalties during tax mapping.

Online Business Registration Philippines

Here are the following steps:

    • Fill up the Registration Form 1901 (2 originals)
    • Present any government ID that is readable and untampered (e.g., Birth Certificate, Passport, Driver’s License.
    • Present the DTI Certificate, old or new.
    • Payment to the New Business Registrant Officer posted in the New Business Registrant Counter (NBRC). Pay the Annual Registration Fee of five hundred pesos only (500.00) and thirty pesos (30.00) for loose Documentary Stamp Tax for affixture to COR.
    • Lastly, Secure Bureau of Internal Revenue printed receipts/BIR Printed Invoices or the Authority to Print (ATP). You need more or less two thousand pesos (2 000) to print ten booklets of receipts in this process.

Upon the complete process of registration, you will receive the following output:

  • Certificate of Registration
  • Copy of BIR Registration Form 1901 (with stamped “Received”)
  • Notice to Issue Receipt/Invoice or Authority to Print (ATP)
  • Proof of Payment of Registration Fee

Once you have the following documents, make sure to process the printing of receipts immediately. You’ll need to look for a printing press that is registered in the BIR. Although registration did not include the mayor’s Permit, it doesn’t mean you’re no longer required to apply. Mayor’s Permit is necessary, especially if you have a physical place of your business. Your online business registration might cost you more or less three thousand pesos (3,000.00), depending on the RDO.

Tax on Online Business Registration Philippines

During the application processing, you need to pause and think about what tax to register for my online business. Why should you do this? It doesn’t mean that once you disclose your business, that the end. You’re wrong; you just opened your partnership with the government.

Type of Taxes

Type of taxes that you should know. First is the income tax, to which you might be subject to the regular rate of 0-35% or a flat rate of 8%. The second is the business taxes. Business taxes are different from the income tax as to the tax base. In income tax, the tax base is not the income or the transaction, but the person is earning an income, while Business tax is taxes on the operations or selling goods or services.

Three ways to save money from taxes:

Register as Marginal Income Earner. If your online business earns less than 100,000 per year and is not currently employed, you’re qualified to register as MIE. Make sure your business is only for subsistence or livelihood as a small sari-sari store. Read: how to open a sari-sari store and some tips in the opening.
Apply as BMBE or Barangay Micro Business Enterprises. BMBE is any business enterprise engaged in producing, processing, or manufacturing products, including agro-processing, trading, and services, with a total asset of not more than 3 million pesos. For more detail on BMBE, visit your nearest Negosyo Center for more inquiries.

Decide as Regular Rate or Preferential Rate. If you choose the regular rate, you will be paying the income tax plus a business tax of 3% or 12% depending on your annual sales; however, if you decide to pay at an 8% preferential rate, there is no more business tax. Learn more on how to reduce your tax legally.

To understand better as to what tax rate, let us make an illustration. Assuming that your business will have an annual sale of 520, 000 with total business expenses of 10, 000, Sales from the previous quarter were 257, 500 with 2,500 business expenses. In this scenario, which tax should you use?

Option 1: Income Tax Rate plus Percentage tax of 3%

To compute the percentage tax is multiply the 3% to the quarterly sales of 257, 500, which is 9,000. It means that quarterly you will be paying 7,650. Compute also the quarterly income tax return. Quarterly income less quarterly business expenses is equal to the quarterly income tax return. On this scenario, 257, 500-2,500= (255,000-250,000)*20% is equal to 1,000 pesos. Therefore, the total payment for taxes is 18,500.
At the end of the year, you need to file an Income tax Return. Here is the computation for the annual income tax return.

Annual Sales 520,000
Less: Business Expenses 10, 000
Gross Income 510,000
Less: Deduction 250,000
Taxable Income 260,000
First tax – 0
Excess over 250, 000 2,000 2,000 2,000
Less: Previously Paid 1,000
Tax Payable 1,000

Option 2: Preferential Rate of 8%

The computation is not complicated, and there is no need to use the schedular income tax rates. This rate is preferable if you have only a few business expenses. No business expenses are deducted from the total sales.

Annual Sales (Last Quarter) 520,000-257,500 262, 500
Less: Deductions 250,000
Taxable Income 12, 500
Tax Due (*8%) 1, 000

Based on the illustration above, the Preferential tax rate is the best option. However, if your business incurred many expenses, then you must reconsider it. To know if you’re qualified to avail of the 8% tax rate, read: how to avail 8% tax rate.

Conclusion

Is it possible to pay no tax on your online business? The answer is No, but at least if you choose the proper charge to pay, then perhaps you can save money in the future. At this point, you may proceed to the online business registration Philippines. If you’re not yet sure, leave your questions below in the comment section.

Recommended: 25 Ways to Reduce Your Tax Burden as a Small Business in the Philippines

10 Replies to “No Payment of Tax on Your Online Business in the Philippines”

  1. Hello. mag oopen po ako ng essential store like minimart.. ask ko lang po, kung ideclare ko po bang minimart yung itatayo ko,mas malaki po ba ang tax? and mag oopen po ako nitong December 18,kelan ko po dapat iprocess ang permits?Thank you po

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