A look into the future of the tax-tech convergence – Business Mirror

By Joshua Tito L. Tangca

Technology has been in a constant surge—bringing about both improvements and disruption to the normal scheme of things. It has revolutionized the business setting and people’s lives, or, at least, their daily grind, to something more convenient and comfortable. More and more processes are being automated—transactions involving buying, selling, remittance, reservations or bookings, communications, transport, among others—consolidating more aspects of everyday life within the purview of information technology.

In this modern era, e-commerce
and the digital economy play a significant role in the creation of business
opportunities. More people took the leap of faith and embarked on transacting
business online. The turn of events may be quick, but taxation authorities are
catching-up. The Bureau of Internal Revenue (BIR) has issued regulations over
time to facilitate tax compliance and collection in this emerging platform.

Transactions made through the
Internet as a virtual marketplace, such as online shopping or retailing, online
intermediation services, online advertising and online auctions are considered
no different from those transacted in brick and mortar stores or physical
shops. Thus, RMC 55-2013 enjoined online businesses to comply with the existing
revenue regulations as applicable to other typical establishments such as
registration of the business at the Revenue District Office, securing Authority
to Print invoices/receipts, registration of books of accounts, issuance of
registered invoice or receipt, withholding and remittance of required
creditable/expanded withholding tax, final tax, tax on compensation of
employees, and other withholding taxes, filing applicable tax returns on or
before the due dates, payment of correct internal revenue taxes, and submission
of information returns and other tax compliance reports, maintenance of books
of accounts and other business/accounting records within the time prescribed by
law, and making these available for inspection and verification by the BIR.

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Unbearable traffic congestion
popularized ride hailing/sharing transport solutions provided by transport
network companies. TNCs are a pool of transport vehicles that may be accessed
through a common point of contract online, commonly with the use of mobile applications
to book these vehicles for transport. The BIR issued RMC 70-2015 reiterating
the tax incidence on persons engaged in land transport using this mechanism.
The TNCs and their partners are considered common carriers subject to 3-percent
common carriers tax on their gross receipts if they were issued a Certificate
of Public Convenience. Operating without CPC would mean that they will be
classified as land transportation service contractors, subject to the
12-percent VAT; or if annual gross receipts do not exceed P3 million, may be
taxed under the 3-percent percentage tax at their election.

Aside from processes going
online, some products are also taking on an electronic form. Unlike products
that are sold in a tangible form, some electronic products may give rise to
some tax issues. Books, journals, and other similar publications that appear at
regular intervals, with fixed selling or subscription prices, and are not
devoted principally to the publication of paid advertisements are exempt from
value-added tax. The E-commerce Law of 2000 was referred to by VAT Ruling
002-08, which considered e-books, e-journals, and online academic library
resources as essentially the same as those books or journals in printed form.
However, a RMC issued on 2012 contradicted VAT Ruling 002-08 and subjected
these electronic resources to VAT. It strictly regarded books to be printed;
hence, sale and importation in its electronic form do not qualify for the VAT
exemption. In a similar vein, the same confusion may arise over treatment of
passive royalties from electronic books and publications—whether they fall
under the 20-percent rate on final withholding tax on royalties in general or
under books, literary works and musical compositions, which are subject to
10-percent tax.

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Taxation authorities around the
world, as well as here in the Philippines, are embracing the digitalization of
tax administration. The recent enactment of the Tax Reform for Acceleration and
Inclusion law requires Large Taxpayers and entities engaged in export to issue
electronic receipts and invoices. As early as 2003, the idea of electronic
invoicing was introduced by the BIR through RMC 71-03. Although this measure is
not new, it provides us with an outlook into the transition of tax
administration and compliance to a more technologically advanced
state—preventing tax leakages and a more efficient and effective discharge of
the tax function.

Joshua Tito L. Tangca is a Tax
Associate at Reyes Tacandong and Co. He earned his bachelor’s degree in
Accountancy at the Technological Institute of the Philippines Quezon City, cum

This column accepts
contributions from accountants, especially articles that are of interest to the
accountancy profession, in particular, and to the business community, in
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