BIR previously delayed the collection of taxes by 90 days to give businesses time to comply with requirements.

The Bureau of Internal Revenue (BIR) has announced that online marketplace operators have started imposing withholding taxes on sellers and merchants. The imposition of the withholding tax began on July 15, 2024, in compliance with Revenue Memorandum Circular (RMC) 079-2024. 

In a news release, BIR Commissioner Romeo Lumagui Jr. said that the BIR has “already extended this by 90 days. No further extensions will be given.” The extension was granted so that businesses had ample time to comply with the requirements of the government. 

Lumagui also clarified that the withholding tax being imposed is not a new tax. 

He explained, “It’s merely a system of taxation where taxes are collected at source, which will be credited against the total income tax liability of the sellers/merchants.” 

RR No. 16-2023

According to Revenue Regulations (RR) No. 16-2023, a 1% withholding tax will be applied on “one-half of the gross remittances by e-marketplace operators and digital financial services providers to the sellers/merchants for the goods or services sold/paid through their platform/facility.” 

However, there are exemptions to this. Online sellers and merchants whose annual total gross remittances for the past taxable year do not exceed PHP 500,000 are not subject to the withholding tax. Likewise, online sellers and merchants whose cumulative gross remittances in a taxable year have not yet exceeded PHP 500,000 are exempt. 

In addition, sellers and merchants who are duly exempt from or are subject to a lower income tax rate due to an existing law or treaty are exempt. However, these sellers and merchants are required to present documentary evidence, such as a certification, clearance, or ruling, proving that they are exempt. 

Sellers and Merchants Must Pay Taxes

BIR Commissioner Lumagui stressed the need for online sellers and merchants to pay their taxes. This echoes similar sentiments made by former BIR Commissioner Lilia Guillermo. 

According to Lumagui, “The BIR aims to level the playing field between brick-and-mortar stores, which are regularly complying with their tax obligations, and online marketplaces.”

“Whether their business is operated online or through physical stores, sellers and merchants have to pay their taxes,” he stressed.