Recently, many friends who do e-commerce have faced the requirements of the Philippine E-commerce Transaction Law because they do not have Philippine identity, and they must register BIR2303 on the e-commerce platform, and they don't know what to do. Why did the policy situation change abruptly? The reason is simple, a law on e-commerce regulation and transactions, the Philippine E-commerce Transaction Act (ITA), was passed and began to be enforced by DTI. So since January this year, various refund policies and taxes have begun to become stricter. The era of ITA's good profit and savage growth in the Philippines through e-commerce has basically come to an end.
As we all know (in fact, many people don't know) because the retail industry in the Philippines belongs to the negative list of foreign investors, there has always been a high threshold for foreign investors to do retail. In addition to the registered capital, there is also a requirement for the paid-in capital to be in the SEC trust account. It's just that Internet e-commerce platforms such as Lazada, Shopee, Amazon and the rising star - TikTok bring goods, but they have not made specific requirements in the past, and they have turned a blind eye to retail, wholesale or dummy companies (who know everything). And now, because the Philippine E-commerce Transaction Law signed on December 5, 2023 will also be implemented, and tax registration is required. At present, all major platforms have given a grace period of 4-6 months. Now all major platforms have begun to require stores and accounts to register, and as soon as the grace period arrives, they will be shut down immediately, which means that the irregular operations in the past have almost come to an end. Because in the past, basically no one checked, and BIR did not actually pursue this part of the tax. But as soon as the pie gets bigger, it's only natural that the IRS will be eyeing you. Since the epidemic, the e-commerce market in the Philippines has continued to grow rapidly. From 2020 to the present, sales have grown by more than 12% per year, and e-commerce sales are expected to grow at a CAGR of 9% in 2024. Against this backdrop, Republic Act No. 11967, the Internet Transactions Act of 2023 (ITA), was signed into law on December 5, 2023. ITA laws are designed to promote and regulate the e-commerce market in the Philippines, protect consumer rights and data privacy, encourage innovation, promote competition, ensure the security of Internet transactions, maintain intellectual property rights, ensure product standards and safety compliance, and comply with environmental sustainability. The ITA will apply to all business-to-business (wholesale) and business-to-consumer (retail) internet transactions within the scope of the Department of Trade and Industry (DTI) authorization. As long as one of the parties is located in the Philippines, or the place where the digital platform is registered, the e-tailer or the merchant is using the Philippine market to generate revenue, it will be subject to the regulation of this law. Under the ITA, consumers, e-commerce platforms and other digital platforms are obliged to comply with their obligations under the law in all Internet transactions. Electronic marketplaces and digital platforms must ensure that internet transactions on their platforms, including offers, are clearly legible. Platforms must protect a list of documents provided by all merchants. There is also a need to protect the data privacy of consumers.
The ITA E-Commerce Transaction Law has strengthened its supervisionAfter the passage of the law, e-tailers and online merchants must ensure that online consumers receive goods in the same condition, type, quantity and quality as they describe and display online, in accordance with the goods and services provided under the E-Commerce Law. List and fit for the specific purpose required and ensure the correct and complete delivery of goods or services to the consumer.
DTI of the Philippine Department of Trade and Industry will be authorized by the ITA to establish an e-commerce bureau to supervise e-commerce. The ITA grants DTI (Department of Trade and Industry) regulation and jurisdiction over the use of the Internet by Internet marketplaces, merchants, e-tailers, digital platforms, and third-party platforms for e-commerce. DTI reserves the right to issue subpoenas, subpoenas, and compliance orders requiring merchants, platforms, and third-party platforms to comply with ITA regulations. After investigating and verifying whether the product is illegal, he can issue a unilateral takedown order, remove the list of products**, and establish a list of internet platforms that do not comply with the compliance order or blacklist them.
In addition, the ITA allows for the right to sue foreign entities against persons who use the Philippine market to engage in electronic commerce, even if they do not have a physical presence in the Philippines. However, under the ITA, an overseas aggrieved party can first avail itself of the digital platform, e-marketplace or e-tailer's internal remedy mechanism, and if it is ineffective, can file a complaint with any court or agency in the Philippines, or resort to alternative dispute resolution. If the complaint is not resolved after seven calendar days after it was submitted, the mechanism is considered to have been exhausted and the legal process is followed. The e-tailer or online merchant will be primarily liable for compensation for civil lawsuits or administrative complaints arising from online transactions by online consumers, rather than the platform. However, the ITA also imposes joint and several liability on electronic marketplaces or other digital platforms for failing to act promptly upon notice to remove or disable access to goods or services that are prohibited by law and that are imminently harmful, unsafe or dangerous by law. The ITA authorizes the DTI to impose administrative fines of up to 1 million pesos on merchants, e-tailers, marketplaces and other digital platforms, without prejudice to the civil or criminal liability of the offending party, in addition to permanently removing any listing or ** on any internet platform with a takedown penalty. The impact of the ITA on Philippine e-commerce remains to be seen due to the establishment of the E-commerce Bureau, the ODR process and the issuance of the ITA implementation rules have not yet been completed. It is hoped that ITA will further improve e-commerce in the Philippines and enhance consumers' confidence in online transactions.
The Philippine Department of Trade and Industry estimates that total e-commerce sales in the Philippines could reach $24 billion by 2025. Such a big piece of cake naturally needs to be strengthened, and with such a big tax cake, how could BIR let it go? And I have shopped online in the Philippines, I know that the quality is worrying, no matter what it is? All in all, the promulgation of the ITA, whether you are happy or not, the new law has become imperative. If your store has not yet registered BIR2303, please complete the registration before the grace period expires.