Bureau of Internal Revenue Commissioner (BIR) Romeo Lumagui Jr. clarified that small-scale online sellers with annual transactions below half a million are exempted from the creditable withholding tax under Revenue Regulation No. 16-2023 and Revenue Memorandum Circular No. 8-2024.
This is in relation to the creditable withholding tax of 1 percent on one-half of the gross remittances by e-marketplace operators and digital financial services providers to sellers/merchants for the goods or services sold/paid through their platform/facility.
“Small-scale online sellers are exempted from withholding tax. The BIR is sympathetic to small businesses in its approach to taxing online sellers/merchants,” Lumagui said.
The BIR said sellers/merchants are exempted from withholding tax if the annual total gross remittances to an online seller/merchant for the past taxable year did not exceed P500,000; if the cumulative gross remittances to an online seller/merchant in a taxable year did not exceed P500,000; or the seller/merchant is duly exempt from or subject to a lower income tax rate pursuant to any existing law or treaty.
The gross remittances of P500,000 consist of the total amount of remittances received by the seller/merchant for sale of goods and services from all e-marketplace operators and digital financial services providers.
“For those who are above the threshold of P 500,000 annual gross remittance, it is only fair that they will be subjected to withholding tax. 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,” Lumagui said.
RR No. 16-2023 and RMC No. 8-2024 are the regulations issued by the BIR that explain the withholding tax of online sellers. It covers the definitions, taxations, and the obligations of online sellers and online platforms on the withholding tax system.
“The BIR has a friendly and approachable stance as regards the taxation of online sellers. We know that most of our online sellers do not have the intention to evade taxes. They just need guidance in the registration and payment processes. The BIR is here to provide all the guidance and explanation needed to this new sector of society. We are here to educate. We are at your service.” Lumagui said.
He also ordered the BIR to educate and guide online sellers and online platforms on their tax obligations.