BIR requires online sellers to pay 1 percent withholding tax

MANILA, Philippines — Online merchants are now required to adhere to a one percent withholding tax based on the latest regulation from the Bureau of Internal Revenue (BIR).

BIR Revenue Regulation No. 16-2023 officially imposes a one percent withholding tax on gross remittances made by operators of electronic marketplaces and digital financial services providers.

Gross remittance refers to the total amount received by an e-commerce platform operator or digital financial services provider from transactions that used their platforms, the BIR explained.

Digital financial services providers, on the other hand, act as middlemen who facilitate online transactions between sellers and buyers through electronic means such as mobile payment services, banking services, or credit cards.

The new tax rule, dated December 21, imposed a withholding tax on “one-half of the gross remittances by e-marketplace operators and digital financial services providers to the merchants for the goods or services paid through their platform.”

Hence, the BIR will collect a one percent tax on half of the total amount the online financial platforms give their partner sellers or merchants for the goods or services sold through the former’s platform.

This is on top of existing withholding tax obligations being imposed on e-marketplace operators.

Exemptions

This latest regulation, however, exempts online merchants who earn less than half a million pesos in a taxable year.

Also exempted are online merchants whose cumulative gross remittances in a taxable year has not reached half a million pesos.

The BIR’s regulation came after it earlier expressed intent to tax online sellers before the end of 2023 as part of the government’s efforts to cash in on the growth of e-commerce transactions in the country.

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