DTI chief: Online barter taxable only if part of regular business

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After getting swamped in social media, Department of Trade and Industry (DTI) secretary Ramon Lopez clarified on Wednesday, July 15, that online barter will only become taxable if it is done in the ordinary course of business.

DTI secretary Ramon Lopez. (Malacanang photo)

“[The] DTI would like to clarify that personal transactions not in the course of trade and business are not covered by registration requirements, and is therefore, not subject to tax,” Lopez said in a statement.

The trade chief said online barter – as well as other online transactions — is subject to tax if it has become part of a regular commerce or business. “However, local barter trade activities with less than P3 million gross sales per year may avail of value added tax (VAT) exemption,” he said.

Lopez stressed that barter is regulated under Executive Order (EO) No. 64 signed by Pres. Rodrigo Duterte in 2018. The EO also established the Mindanao Barter Council, tasked to supervise and coordinate barter activities in the Philippines.

“This EO stresses that barter trade is only allowed in three areas, namely in Siasi and Jolo in Sulu and Bongao in Tawi-Tawi. Outside those areas, barter trading across borders is not allowed,” he added.

Lopez said that while there is no clear prohibition against local barter trade, such transactions are still subject to regulation and should be registered.

“This is what I meant as illegal — those done in other areas or if done online and cross border, or as a regular business in the course of trade — as these are not registered and not taxed,” he said.

Sen. Ralph Recto, meanwhile, said the DTI should further clarify that no law is being violated by neighbors swapping goods in community chat groups.

“When you exchange a tax-paid shirt too small for you for tax-paid shorts too big for your friend, where is the revenue loss for the government?” he asked in statement.

Recto said the government is better off spending its energy going after POGOs than millennials swapping their sneakers for goods they like.

“Where is the harm to the economy in a farmer swapping his pig for a secondhand computer for his child’s use, unlike the clear sabotage done by smugglers who bring in pork cuts by the boatload?” he queried.

The lawmaker said bartering is a fixture of life in many rural communities where a bag of rice is traded for a basket of vegetables and money is not always the medium of exchange.

“This ancient practice is even evident in our language. ‘Palit’ in Tagalog means ‘exchange’, but in Cebuano it is the word for ‘buy’,” he said.

“To survive the economic crunch of the lockdown, people are bartering unused and surplus household items, not to monetize them, but for goods they need. Previously loved items are being rehomed.”

Recto said people are doing online barter not to get rich, but to get by. “Bartering is the people’s way of generating economic activity. How can this be wrong?”

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