The Bureau of Internal Revenue (BIR) has clarified that not all online sellers are obligated to follow the government’s withholding tax regulations.

In a statement, the BIR said that electronic marketplace operators and digital financial service providers, such as Lazada and Shopee, are required to withhold a one percent tax on half of their gross remittances to online sellers.

However, the bureau pointed that this withholding tax rule will only be applicable if the e-marketplace operators' annual total gross remittances to online sellers surpass P500,000 for the preceding taxable year.

"Small-scale online sellers are exempted from withholding tax,” BIR Commissioner Romeo D. Lumagui Jr. said on Monday, Jan. 29. “The BIR is sympathetic to small businesses in its approach to taxing online sellers/merchant."

To be specific, the BIR said that online sellers whose annual total gross remittances for the past taxable year and those whose cumulative gross remittances in a taxable year do not exceed P500,000 are exempted from the new tax regulation.

"For those who are above the threshold of P500,000 annual gross remittance, it is only fair that they will be subjected to withholding tax,” the BIR chief said.

“We have to be fair to the retail sector and brick and mortar stores who are regularly paying their taxes. If you have a business, you have to register and pay your taxes. It doesn't matter if it’s an actual store or an online store. It is your responsibility to pay taxes like everyone else,” he added.

Based on the regulation, online sellers who have surpassed the P500,000 threshold are, likewise, required to submit a sworn declaration, duly received by the BIR along with a declaration from the e-marketplace operators. 

The declaration document should be submitted on or before the 20th day of the first month of each taxable year.