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No Payment of Tax on Your Online Business in the Philippines

Three reasons why you should register your business in the BIR: Build Customer’s Trust, Avoid Scams and lastly is to save money. You will be interested to know how much the registration will cost you and how you can save money from the right tax for your online business. To make it understandable, you may look at the illustration and discussions below.

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 tax on my Online Business?

Why Should You Register Your Online Business?

If you’re still wondering at this point, consider these three (3) reasons why you should register your online business in the Bureau of Internal Revenue (BIR).

Helps Build Customer’s Trust

Buyers are more confident to buy their products to those who are a legitimate business and who have a trustworthy brand. One way to that is to have the Certificate of Registration (COR) issued by the Bureau of Internal Revenue (BIR).
Having this legal document will help you to attract more customers to buy your products or services. So, make sure to 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 much amount because of fees and penalties. 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 Invoice or the Authority to Print (ATP). In this process, you need more or less two thousand pesos (2, 000) to print ten booklets of receipts.



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 which is registered in the BIR. Although the mayor’s Permit was not included in the registration process, 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. The registration of your online business might cost you at 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

Two types of taxes that you should consider in your online business registration. First is the income tax, which you might be subject to the regular rate of 0-35% or a flat rate of 8%. Second, are 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 enterprises engaged in production, processing, or manufacturing or 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 inquiry.

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

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 are 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 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 right 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.

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LATEST TAX ISSUANCES!

Revenue Regulations No. 20-2020 amends certain provisions of RR No. 06-2008 (Consolidated Regulations Prescribing the Rules on the Taxation of Sale, Barter, Exchange or Other Disposition of Shares of Stock held as Capital Assets). ​RR 20-2020

Revenue Memorandum Circular No. 83-2020 addresses the issues and concerns of taxpayers regarding the tax implications of measures being implemented to prevent the spread of COVID-19 on cross-border matters. ​RMC 83-2020

Revenue Memorandum Circular No. 82-2020 prescribes the guidelines on the use of the eAFS System for the submission of attachments to the Income Tax Returns of taxpayers with Fiscal Year Accounting Period and in the submission of attachments to the quarterly Income Tax Returns.​ RMC 82-2020

Revenue Memorandum Order No. 28-2020 prescribes the updated policies and procedures for the granting and revocation of system access. ​RMO 28-2020

Revenue Memorandum Order No. 27-2020 prescribes the BIR Digital Transformation Roadmap for 2020-2030. RMO 27-2020

Revenue Memorandum Order No. 26-2020 prescribes the use of the revised Exchange of Information Manual, amending for this purpose Revenue Memorandum Order Nos. 2-2013 and RMO No. 3-2013. RMO 26-2020

Revenue Regulations No. 17-2020 implements the Tax Neutrality provision of Republic Act No. 11439 (An Act Providing for the Regulation and Organization of Islamic Banks). ​RR 17-2020

Inventory and Inspection Report of Unserviceable Property. more

Revenue Memorandum Circular No. 80-2020 amends the Revenue District Offices covered by RMC No. 79-2020. 

Bank Bulletin No. 2020-12 advises all BIR Authorized Agent Banks to accept tax payments also from taxpayers under RDO Nos. 55, 56 and 57 (even out-of-district returns) during MECQ period. BB 2020-12

Revenue Memorandum Circular No. 79-2020 provides the guidelines in the filing of various returns and payment of tax due thereon of taxpayers under the jurisdiction of National Capital Region, Bulacan, Cavite, Laguna and Rizal. RMC 79-2020

Bank Bulletin No. 2020-11 advises all Authorized Agent Banks to accept tax payments from taxpayers under the jurisdiction of National Capital Region, Bulacan, Cavite, Laguna and Rizal. ​BB 2020-11

Revenue Memorandum Circular No. 78-2020 prescribes the guidelines for the filing of various returns and payment of tax due thereon of taxpayers under the jurisdiction of Revenue Region No. 13-Cebu City. RMC 78-2020

Revenue Memorandum Circular No. 77-2020 clarifies ECQ as referred to under RMC No. 74-2020. RMC 77-2020

Revenue Memorandum Circular No. 75-2020 extends the deadline for business registration of those into digital transactions under RMC No. 60-2020. ​RMC 75-2020

Revenue Memorandum Circular No. 74-2020 amends and/or clarifies certain provisions of RMC No. 34-2020 relative to the suspension of the running of the Statute of Limitations. ​RMC 74-2020

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