In a bid to check the tax evasion among operators of privilege stores, more popularly known as “tiangge,” the Bureau of Internal Revenue has issued a regulation detailing their tax obligations.
The BIR said owners of privilege stores that are operating for more than 15 cumulative days a year were considered regular businesses and, as such, should pay the usual tax obligations on enterprises, including income and value-added taxes.
The BIR said these operators should not be treated differently than other businesses in terms of taxation.
On the other hand, the BIR said owners of privilege stores operating for 15 days or less would be considered consignees of the “organizer,” or the person or entity that leases out space that the BIR treats as the consignor. In this case, the tax bureau said the organizer would be the one responsible to pay the income tax. The consignor should also provide the privilege store operators with point-of-sale machines and allow them to use its own sales invoices and receipts.
“The relationship between organizer and privilege store operators that are not registered as regular taxpayer [because its operation is only for 15 days or less] engaged in trade or business shall be consignor-consignee relationship,” the BIR said in Revenue Regulation 16-2013.
The regulation was signed by Internal Revenue Commissioner Kim Henares and has already been approved by the Department of Finance.
The BIR further said in the regulation that privilege store operators who pay rent to the organizers would be required to withhold 5 percent of the gross amount of rent and remit the money to the tax agency.
Similarly, the BIR said that organizers who pay rent to owners of the space being leased out for the operation of privilege stores would also be required to withhold the 5-percent tax and remit this to the tax bureau.
The BIR also said that it was the responsibility of the organizers to help ensure the proper payment of taxes by the privilege store operators.
In particular, organizers are required to provide the BIR, through its revenue district offices, with the lists of privilege store operators they are doing business with.
The organizers must also require privilege store operators to show tax identification numbers, sales receipts and other records of sales and tax payments.
The BIR hopes that with the latest revenue regulation, more privilege store owners would register as taxpayers and shift from becoming part of the informal sector that is not captured by the tax system.