BIR Plans to Impose a New Tax on Online Sellers

With e-commerce on the rise, the government has previously reminded the public that selling online does not exempt business owners from paying taxes.

Filipinos are among the heaviest users of the internet and social media. This, paired with the many business opportunities of said platforms, has made e-commerce an instant hit, especially during the pandemic. In fact, according to the Department of Trade and Industry (DTI), there are around two million entities selling goods and services as online sellers as of last year.

But with online selling on the rise, this raises the question: will it soon be taxable?

That might just be the case as the Bureau of Internal Revenue (BIR) is looking at implementing a creditable withholding tax on the income payments made by online platform providers.

“With the proliferation of online sales transactions through the facilities of online platform providers, there is a need for the BIR to take advantage of this opportunity to identify sellers of goods and services who are therefore obliged to declare their income resulting from these transactions for tax purposes,” reads a BIR advisory on the matter. 

Amending Revenue Regulations No. 2-98

Furthermore, the BIR believes that this new tax should be imposed on the gross remittances of online platform providers to the sellers. These online platform providers include marketplaces, food delivery, and payment or remittances, among others. Based on this definition, the proposed tax may cover platforms such as Shopee, Lazada, GCash, and Grab. 

For this to happen, the BIR is proposing to amend Revenue Regulations No. 2-98, since the current ruling does not include income payments by online platform providers. 

According to the draft rule, online platform providers that do not require the registration of sellers can only impose the withholding tax under a particular circumstance. It can only be done when there is a single purchase of goods and services that amount to PHP 10,000.

The withholding tax will likewise be imposed if the same buyer and seller have transacted with one another at least six times. The amount per transaction is disregarded in this case.

Online Sellers Must Pay Taxes

Back in November, the BIR reminded that online sellers and even influencers must pay taxes, according to a report by ABS-CBN News. However, BIR Commissioner Lilia Guillermo has pointed out that many online sellers and influencers have yet to do so. 

The BIR commissioner is likewise hoping for legislation that will make it possible to expand the tax base further—including one that allows for taxes on digital services bought or subscribed in the country from a company that is based overseas. Commissioner Guillermo notes that around PHP 11 billion can be added to the tax collection, should such legislation be passed. 

How This New Tax Will Affect Online Sellers

If any legislation on new taxes pushes through, this will have a direct effect on the income that online sellers make from their businesses. Because of this, online sellers will need to increase their prices to compensate for additional taxes. This, in turn, will influence their customers’ decisions on whether or not they will make a purchase and will also affect the overall pricing of many items.