Solon says DTI registration for online sellers for regulation only, not for tax

The registration of an online business with the Department of Trade and Industry (DTI) is for regulation purposes and does not mean it will automatically be taxed, Valenzuela representative Wes Gatchalian said Monday, June 15.

Valenzuela representative Wes Gatchalian

The lawmaker issued the clarification in the wake of a backlash to the Bureau of Internal Revenue’s (BIR) order for online sellers to register and pay tax dues.

“The DTI encourages registration of online businesses to ensure consumer protection and to build trust and confidence in the use of these online platforms,” he said.

Gatchalian, chair of the House Committee on Trade and Industry and author of House Bill No. 6122 or the proposed Internet Transactions Act, which would regulate online transactions, said the regulatory framework he is proposing should not be taken as a barrier to business, but an opportunity for growth in terms of access to government programs and incentives.

“By legitimizing one’s business through registration, it becomes eligible to avail of loans, trainings from the DTI and other government agencies,” he said.

Gatchalian added his bill also gives newly-registered micro-enterprises exemption from all national and local taxes for the first two years of operation. “We are giving this incentive so that we can attract these unregistered micro enterprises to register with the DTI,” he said.

The BIR issued Revenue Memorandum Circular (RMC) 60-2020 on June 1 ordering businesses earning income “through the use of any electronic platforms and media, and other digital means” to register and settle taxes on or before July 31. The tax agency warned that online merchants who fail to meet the deadline would incur penalties.

In 2013, BIR issued RMC 55-2013 reminding taxpayers that online sales are taxable, but only the latest circular imposed a deadline to settle these taxes and warned that surcharges may apply.

Based on a study conducted by Google and Temasek, the internet economy in the Philippines — including e-commerce, online travel, online media, and ride hailing — is now valued at $7 billion, growing from just $2 billion in 2015.

Meanwhile, one the latest surveys published by the United Nations revealed the Philippines now has an estimated population of 108 million people, with 73 million or 67% of the population now active internet and social media users.

In just over a decade, the Internet penetration rate grew from a mere 9% to a staggering 67%. This represents a growth rate of over 600%. This penetration rate is among the highest in the world with the global average only at 54%.

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