BIR taps Russian, Korean experts in digital taxation

MANILA, Philippines — The Bureau of Internal Revenue (BIR) will work with its counterparts from Russia and South Korea to come up with a tax structure that would capture digital transactions.

Finance Secretary Carlos Dominguez has instructed the BIR to set up a unit tasked to track the sale of goods and services online.

This group, he said, should work with internal revenue counterparts abroad in coming up with a policy that would cover digital platforms.

Dominguez said the Philippines should catch up with economies overseas in making sure that the tax system includes digital transactions. The pandemic compelled buyers and sellers to move their activities online, as physical outlets were ordered shut in a bid to contain the spread of the virus.

In September, the House of Representatives approved on third and final reading a measure that seeks to slap a 12 percent tax on digital transactions. Under the proposal, technology giants like Facebook, Google, Netflix and YouTube will collect value-added tax (VAT) for transactions made in their platforms.

In turn, they need to remit the VAT to the government to add an estimated P29 billion to state resources for managing the pandemic.

Aside from taxing the technology powerhouses, the BIR monitors the tax compliance of social media influencers, or individuals who earn by publishing content online.

In a first of many moves, the BIR came up with an initial list of 250 influencers who were profiting the most from content production to see whether they are paying taxes.

The BIR initiated a tax hunt against influencers through the issuance of a revenue memorandum circular (RMC) in August. Under RMC 97-2021, influencers with gross income of P3 million and above were told to pay a VAT of 12 percent, while those below that threshold must settle eight percent on the gross sales or receipts in excess of P250,000.

In exchange, they can avail of deductions extended under the law provided that they provide the invoices for the items. This will allow the influencers to take out business expenses, particularly video equipment, computer and subscription fees, from the taxes billed to them.

The BIR released the RMC as part of efforts to gauge how large the digital economy has grown during the pandemic.

The RMC also reminded influencers against trying to evade paying their taxes, as they may face a jail term of six to 10 years and a sanction of up to P10 million.