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Manila Bulletin devider Business devider BIR imposes withholding tax on high-earning online sellers

BIR imposes withholding tax on high-earning online sellers

Published Dec 29, 2023 07:07 am

At A Glance

  • The Bureau of Internal Revenue (BIR) said that online sellers earning over P500,000  annually are now subject to a withholding tax<br>The  BIR new tax regulation imposes a one percent withholding tax on electronic marketplace operators and digital financial service providers<br>Online sellers or merchants making less than 500,000 pesos annually are exempt from the withholding tax<br>BIR Commissioner Romeo Lumagui clarified that the one percent withholding tax adheres to existing laws and aims to level the playing field between traditional and online retailers<br>The tax is not new, but a means for the BIR to collect taxes from digital transactions, Lumagui said.

The Bureau of Internal Revenue (BIR) has announced that online sellers earning over half a million pesos annually will now be subject to a withholding tax.

This is after the BIR has released a new tax rule that imposes a one percent withholding tax on electronic marketplace operators and digital financial service providers.

According to BIR Revenue Regulation No. 16-2023, the withholding tax will be calculated based on half of the earnings that e-marketplace operators and digital financial service providers pay to the sellers and merchants for the goods or services sold through their platform or facility.

The revenue regulation, dated Dec. 21, 2023, was signed by Finance Secretary Benjamin Diokno and BIR Commissioner Romeo Lumagui Jr.

The BIR, however, stated that online sellers and merchants who earn less than P500,000 annually are exempt from paying withholding tax.

RR 16-2023 revised Revenue Regulations No. 2-98, which previously did not address income payments made by online platform providers.

An online platform provider refers to any entity that acts as a middleman, facilitating transactions between sellers and buyers of goods and services using electronic means and information technology, while also serving as the government's withholding agent.

These providers include various services such as marketplaces, food delivery, accommodation booking, travel and transportation, as well as payment platforms.

Earlier, Lumagui clarified that the one percent withholding tax imposed on online sellers is in accordance with existing laws that require taxpayers to comply.

He explained that the taxation of online merchants also aims to create a fair competition between traditional physical stores and those operating on digital platforms or marketplaces.

The withholding tax refers to the portion of money withheld by a business from payments for goods or services, and is then directly remitted to the government on behalf of suppliers or employees.

Lumagui said this move was due to the increasing number of online sales transactions conducted through online platform providers, prompting the need to identify sellers of goods and services who are obligated to report their income from these transactions for tax purposes.

He said this is not a new tax, but rather a means for the BIR to ensure taxes are collected from digital transactions.

Related Tags

Bureau of Internal Revenue (BIR) BIR Commissioner Romeo Lumagui Jr. online sellers
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