DOF chief orders BIR to study tax practices of other countries on digital transactions

Finance Secretary Carlos Dominguez III has instructed the Bureau of Internal Revenue (BIR) to set up a unit dedicated to track sales of goods done online and to coordinate with their counterparts in other countries to determine how to properly tax these digital transactions.

BIR Commissioner Caesar Dulay said he has already discussed with the Bureau’s National Investigation Division (NID) how this can be done, initially through a task force that will monitor the sales of goods and services done through the Internet.

Dominguez said the BIR should consult with their counterparts in Russia or Korea, to find out how to properly and effectively tax digital transactions.

“We have to catch up with these guys,” Dominguez said during a recent Department of Finance (DOF) executive committee meeting, referring to the surge in online sellers as most consumers have turned to buying goods via digital platforms amid the pandemic.

Apart from online sellers, the BIR is also keeping tabs on the tax compliance of social media (socmed) “influencers” in the country.

Earlier, it said it will investigate an initial list of 250 “influencers” to check if they have been paying their taxes.

The BIR said that Letters of Authority (LOAs) for the conduct of investigation were already issued to certain socmed influencers found to be “top earners” in their field.

According to the BIR, socmed influencers who earn money from their posts on digital media are classified as self-employed individuals or persons engaged in trade or business as sole proprietors.

Their earnings are generally considered as business income, as defined under BIR’s Revenue Memorandum Circular (RMC) No. 97-2021 issued last Aug. 16.

Under RMC 97-2021 issued last month, socmed influencers should pay income tax and percentage tax or, if applicable, the value-added tax (VAT), as mandated under the National Internal Revenue Code (NIRC) and other existing laws.

Based on the Circular, socmed influencers are defined as those who derive their income from the following sources: a) YouTube Partner Program; b) sponsored social and blog posts; c) display advertising; d) becoming a brand representative/ambassador; e) affiliate marketing; f) co-creating product lines; g) promoting own products; h) photo and video sales; i) digital courses, subscriptions, e-books; and j) podcasts and webinars. (DOF)