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Tax Situs

The Philippines passed the Electronic Commerce Act of 2002 to recognize electronic transactions but it lacked provisions for internet taxation. When transactions occur domestically between a Philippine seller and buyer, domestic tax rules apply. However, cross-border transactions complicate taxation when determining the site of the sale or if a permanent establishment exists under tax treaties. In 2000, the BIR said non-resident sellers without a physical presence in the Philippines would not be subject to Philippine income tax. Goods imported into the country are still subject to VAT, which is the importer's liability. In 2013, the BIR issued a revenue memorandum clarifying tax obligations for online sellers and intermediaries, though no comprehensive e-commerce tax law exists.

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Reiner Vesagas
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150 views1 page

Tax Situs

The Philippines passed the Electronic Commerce Act of 2002 to recognize electronic transactions but it lacked provisions for internet taxation. When transactions occur domestically between a Philippine seller and buyer, domestic tax rules apply. However, cross-border transactions complicate taxation when determining the site of the sale or if a permanent establishment exists under tax treaties. In 2000, the BIR said non-resident sellers without a physical presence in the Philippines would not be subject to Philippine income tax. Goods imported into the country are still subject to VAT, which is the importer's liability. In 2013, the BIR issued a revenue memorandum clarifying tax obligations for online sellers and intermediaries, though no comprehensive e-commerce tax law exists.

Uploaded by

Reiner Vesagas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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VESAGAS, Renee Grace O.

ACCTAX A
19 November 2019

Long before the popularization of online selling, the legislators of the Philippines saw the
need to remind its country’s taxpayers of the obligation of paying taxes upon venturing in e-
commerce, they “passed the E-Commerce Law, Republic Act No. 8792 (Electronic Commerce Act
of 2002), providing for the legal recognition and use of electronic commercial and non-
commercial transactions, the said law [however,] lacks specific provisions for the treatment of
Internet taxation in the Philippines” (Estur, 2011) since at the time, the concept of Internet
Taxation was still new and thus, they believed that it would be best to “let it evolve in the
Philippine setting and just revisit it when the need arises” (Estur, 2011).

It is said that if both the seller and buyer “are both physically present in the Philippines,
there is apparently no issue as to business and income tax liability since the income is clearly
sourced within the Philippines” the rules on domestic taxation is applied by the BIR. However, e-
commerce taxation becomes complicated when cross-border transactions occur, when the seller is
an alien and the buyer is a resident in the Philippines, “major issues arise in determining the situs
of the sale or the presence of a permanent establishment under the provisions of tax treaties”
(Estur, 2011). In a draft revenue regulation in December 17, 2000 on e-commerce transactions, the
BIR declared that, “a nonresident of the Philippines who transacts his business through his Web
Site, having no warehouse, or place of distribution, or any business establishment located in the
Philippines, shall not be treated as having a physical presence within the Philippines. His income
shall not be considered Philippine-sourced income and, therefore, not subject to Philippine income
tax” (Estur, 2011). However, goods transacted over the Internet shall be subject to value added tax
(VAT), which shall be the liability of the one who imports the product in the country.

According to the article of Mailyn Consignado (2018), in August 5, 2013, the BIR issued
Revenue Memorandum Circular No. 055-13 which further stated the taxpayers’ obligation on
online transactions. Online sellers are covered by the existing tax regulations and are required to
register and comply to the requirements of the BIR. When online intermediaries are not the actual
seller, they are still required to comply to the regulations of the memo though it is different from
the former.

Though the legislators and the BIR has acknowledged the prevalence of e-commerce
transactions and issued RA 8792 and the RMC No. 055-13, no law on taxation of e-commerce has
been issued that contains an in-depth discussion on the same.

Reference:
Estur, M. J. (2011, February 1). Internet taxation in the Philippines. Retrieved November 16, 2019,
from http://www.bworldonline.com/content.php?id=25513.
Consignado, M. (2018, October 14). How are online merchants and intermediaries taxed?.
Retrieved November 16, 2019, from https://www.bworldonline.com/how-are-online
merchants-and-intermediaries-taxed/.

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