For the first time, online sales surpassed in-store sales in the US during last years

Black Friday, the busiest shopping day in that country following Thanksgiving Day.
One of the most disruptive changes in the field of commerce is online shopping,
which has grown exponentially around the world over the past years, including in
the Philippines. Gone are the days when you have to go from one store to another in
search of the items you need to buy. Now, you can get everything on your shopping
list by merely clicking away, a more convenient exercise for both buyers and sellers.
To cope with the proliferation of online businesses in the Philippines, the Bureau of
Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 55-2013
identifying the tax obligations of online sellers. Online sellers have the obligation to
register with the BIR; secure an Authority to Print (ATP) invoices/official receipts;
register books of account for use in the business; issue registered invoices or
receipts; withhold required creditable/expanded withholding tax, final tax,
withholding tax on compensation and other withholding taxes; and file the
applicable tax returns on due dates and pay the corresponding taxes.
Tax-wise, the total amount of taxes that an online retailer would pay should be the
same as a seller with a brick-and-mortar store. As a general rule, any person or
entity who, in the course of trade or business, sells, exchanges, or leases goods or
properties, or renders services, and any person who imports goods, shall be liable to
value-added tax (VAT). Thus, for both an online seller and a store owner, the sale
transaction shall generally be subject to 12 percent VAT.
For their part, buyers should expect to receive a VAT-registered invoice that
conforms to the BIRs invoicing requirements. They should also be aware of their tax
obligations when transacting online.
For instance, a top 20,000 buyer-corporation is required to withhold 1 percent
expanded withholding tax (EWT) for purchase of goods. If the payment for the
purchase of a product online by a top 20,000 buyer-corporation is through credit
card or through company-issued credit card to officers or employees for purposes of
reimbursements, RMC No. 72-2004 clarifies that the buyer-corporation is not
required to withhold the 1 percent EWT upon presentation of the credit card, but is
required to withhold the 2 percent EWT corresponding to the interest payment
and/or service fee and other charges imposed by the credit card company.
The credit card company, on the other hand, shall withhold 1 percent of 50 percent
of the gross amount paid to the online seller, pursuant to Section 2.57.2 (L) of
Revenue Regulations No. (RR) 2-98, as amended, and receive the agreed
commission from the online seller, net of 10 percent EWT.
Furthermore, under RR 2-98, if the buyer is a registered withholding agent, it is
likewise required to furnish the online seller, in triplicate, with a Certificate of
Creditable Tax Withheld at Source (BIR Form No. 2307) showing the amount of
payment and amount of taxes withheld. The said certificate shall serve as proof of
withholding, which shall be used by the online seller to claim tax credit. This

withholding tax requirement does not apply to individuals, who are not registered
withholding agents, purchasing online.
Buying from an international website versus buying from a local website
Internet shopping knows no boundaries, which is another one of its undeniable
appeals. If the product that you want to buy is not available locally, you can always
look for it online and, using your credit card, make the purchase there.
Note, though, that purchase of goods through an international (non-resident) online
seller is subject to 12 percent VAT on importation. VAT on importation is imposed on
goods brought into the Philippines, whether for use in business or not.
The tax shall be based on the total value used by the Bureau of Customs (BOC) in
determining tariff and customs duties, plus customs duties, excise tax, if any, and
other charges, such as postage, commission, and similar charges, prior to the
release of the goods from customs custody.
In case the valuation used by the BOC in computing customs duties is based on
volume or quantity of the imported goods, the landed cost shall be the basis for
computing VAT. Landed cost consists of the invoice amount, customs duties, freight,
insurance and other charges.
If the goods imported are subject to excise tax, the excise tax shall form part of the
tax base. So dont be surprised if the amount of taxes you have to pay is
significantly higher when you purchase from an international website, compared
with purchasing the same product locally; customs duties figure in the computation.
Payment to a non-resident online seller for the purchase of goods is not subject to
the 30 percent final tax. Under the Civil Code Article 1475, the perfection of the
contract of sale happens when there is a meeting of minds upon the thing, which is
the object of the contract and upon the price. Thus, it can be presumed that the
perfection of the contract of sale between the international online seller and local
buyer happened outside the Philippines when the seller acknowledged the order of
the buyer and agreed on the price.
Let this serve as a reminder to sellers, whether small-scale or large-scale, and
buyers engaged in online business of their tax obligations. Considering the pace at
which online shopping continues to expand, it is already a significant growth driver
in the retail industry.
The author is a Manager with the Tax & Corporate Services Division of Navarro
Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. a UK private
company limited by guarantee (DTTL). Deloitte provides audit, consulting, financial
advisory, risk management, tax and related services to public and private clients
spanning multiple industries. It has more than 210,000 professionals worldwide,
including those in Deloitte Southeast Asia Ltd., which covers Brunei, Cambodia,
Guam, Indonesia, L