DTI, BIR: Online barter not taxable so long as not a business
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AFP, File
DTI, BIR: Online barter not taxable so long as not a business
Gaea Katreena Cabico (Philstar.com) - July 15, 2020 - 10:53am

MANILA, Philippines — Online barter of goods is not illegal, and not subject to taxes, so long as transactions are personal in nature and not conducted to earn a living, Trade Secretary Ramon Lopez clarified on Wednesday.

“For local barter trade, there is no clear prohibition. But these are still subject to regulation, must be registered and subject to tax if again being done in the course of trade or business. As a regular business,” Lopez said in a text message.

“However, personal transactions not in the course of trade and business are not covered by registration requirements,” he added.

Sought for more details, Arnel Guballa, deputy commissioner at the Bureau of Internal Revenue (BIR), said in a text message barter trade is not subject to taxes “if there is no recognized gain.” He did not elaborate when asked.

More recently, President Rodrigo Duterte also issued Executive Order 64 in October 2018 which prescribed barter trade in Siasi and Jolo towns in Sulu, and Bonggao town in Tawi-Tawi under the supervision of a new Mindanao Barter Council.

The clarifications came after Lopez was heavily criticized in social media for saying the trade department will run after online barter, transactions where instead of money, people purchase goods and services by exchanging items.

While barter is the world’s oldest form of trade, the system is getting fresh popularity online from people left stuck at home during the quarantines and unable to visit markets for their needs since mid-March.

In social media, various online barter communities had been established in cities such as Bacolod and Cebu, where transactions saw an uptrend in recent months of lockdown. iPrice Group, a Malaysia-based e-commerce firm, found that at least 2.1 million Filipinos are members of Facebook groups, 72% of whom are based outside Metro Manila.

On top of that, the search for the term “barter” in the Philippines during the lockdown periods of April and May also surged 407% year-on-year. There was also a 203% jump for the term “barter trade” in Google.

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

Tax on online vendors

By law, all types of businesses, regardless if held online or not, must be registered and paying taxes. In the case of barter, when done in business, value-added taxes are expected to be paid by companies and individuals engaged in the practice.

This was the same reasoning applied by BIR in moving to register online vendors and retailers last month, arguing that with brick-and-mortar businesses suffering from lockdowns, most economic activity that generates revenues for the government has dramatically moved online where tax rules are enforced with difficulty. 

Under BIR’s Revenue Memorandum Order 60-2020, issued June 1, online sellers were also given until July 31 to register or risk getting run after by taxmen. Lawmakers have asked BIR to extend the deadline, but no decision has been made days before it.

“Extension of registration is under consideration,” Guballa said.

Lackluster economic activity pulled down BIR collections 25.8% year-on-year to P673.7 billion as of May, latest data showed.

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