[Ask the Tax Whiz] Is Airbnb taxable in the Philippines?

The Philippine Tax Whiz advises Airbnb hosts to register with the Bureau of Internal Revenue (BIR) if they offer their property for short-term or long-term rental.

There's no need for new legislation as existing laws and regulations apply to leasing of property for residential or commercial purposes, whether booked directly, online, or through digital platforms like Airbnb.

How do I register with the BIR as an Airbnb host? What are the taxes I need to pay?

Generally, you have to register as self-employed to lease your property. As self-employed, you have to secure a business name, permit, and certificate of registration from the Department of Trade and Industry (DTI), local government, and the BIR, respectively.

You may subscribe to the TaxWhizPH YouTube channel and watch the episode on the business registration process in the Philippines.

Initially, you will have to pay local tax (business permit), income tax, and percentage tax, if your annual gross sales do not exceed P3 million. Otherwise, you have to pay 12% value added tax (VAT).

I just started renting out my apartment via Airbnb last month. Do I need to issue official receipts? I only got one booking due to the on and off quarantine restrictions. Is there a tax relief or exemption for small income earners like me?

You need to register with the BIR first and issue an official receipt for every rent income payment you receive. Upon registration with the BIR, you may purchase a BIR-printed receipt so you don't have to apply for authority to print or ATP and wait for one to two weeks to have your OR ready.

First, if your total assets do not exceed P3 million, you can apply for barangay micro business enterprise or BMBE certification at the DTI Negosyo Center near you. It will grant two-year income tax exemption.

Second, if your annual gross sales do not exceed P3 million, it means you will have to pay 3% percentage tax quarterly, but under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law, you will only pay 1% percentage tax from July 1, 2020 to June 30, 2023.

As retirees, my wife and I converted our small place in Boracay into a bed and breakfast for local and foreign tourists. We were advised to set up a corporation to avoid estate tax in case one of us dies early. Unfortunately, the COVID-19 pandemic happened. We're still alive but we incurred massive losses. Recently, we started getting bookings from Airbnb and now the BIR is going after us. Please help us.

a. Do we still need to file and pay taxes even during the lockdown when we didn't make any income?
b. As a corporation, can we carry over the losses we incurred in 2020 and even in 2021 to the next three to five years to save on taxes?
c. Since we registered a corporation, is there any tax relief for small businesses like us?
d. Can we instead operate as self-employed?
e. If we have tax questions, where do we go or how do we get help? We cannot afford the professional fees of tax consultants or lawyers
.

a. Yes. Once you have registered with the BIR, you need to file tax returns as indicated in your Certificate of Registration (BIR Form 2303). If you have no income, you can just file what's called a no payment return.

b. Yes. Ordinarily, you can carry over net operating losses as deduction from gross income for the next three consecutive years only. However, pursuant to the Bayanihan to Recover as One Act or Bayanihan 2 (Section 4) and as implemented under Revenue Regulations (RR) No. 25-2020, corporate taxpayers who incurred net operating losses for taxable year 2020 and 2021 can carry those losses over as deductions for the next five consecutive years following the year of the loss.

c. Yes. Pursuant to CREATE law (Section 6) and as implemented under RR 5-2021, small corporations with net taxable income not exceeding P5 million and total assets not exceeding P100 million excluding land shall be taxed at 20%.

d. Yes. But you have to weigh the pros and cons before deciding to register as self-employed and transferring the operations from your corporation.

e. If you have tax questions, just download the TaxWhizPH mobile app. It's free and you can use the Ask the Tax Whiz unlichat feature to ask your tax questions. 

– Rappler.com

Mon Abrea, CPA, MBA, is the co-chair of the Paying Taxes-EODB Task Force. With the TaxWhizPH mobile app as his brainchild, he was recognized as one of the Outstanding Young Persons of the World, an Asia CEO Young Leader, and one of the Ten Outstanding Young Men of the Philippines because of his tax advocacy and expertise. Currently, he is the chairman and CEO of the Asian Consulting Group and trustee of the Center for Strategic Reforms of the Philippines – the advocacy partner of the Bureau of Internal Revenue, Department of Trade and Industry, and Anti-Red Tape Authority on ease of doing business and tax reform. Visit www.acg.ph for more information or email him at mon@acg.ph and download the TaxWhizPH app for free if you have tax questions.