The Bureau of Internal Revenue (BIR) said Tuesday it started the collection of withholding taxes on online platforms on July 15, 2024 after a 90-day grace period.
“No more extensions will be given after the previous 90-day extension under RMC [Revenue Memorandum Circular] No. 55-2024,” BIR Commissioner Romeo Lumagui Jr. said in a statement.
“Electronic marketplace operators will begin imposing withholding tax against their sellers/merchants starting July 15, 2024. We have already extended this by 90 days. No further extensions will be given,” he said.
The BIR granted a 90-day extension, prior to RMC No. 79-2024. The previous extension was given in recognition of the compliance needed with the policies or requirements of other government agencies and to give the affected parties an opportunity to adjust with the provisions of RMC 16-2023.
“Withholding tax is not a new tax. 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,” Lumagui said.
He said the BIR aimed to level the playing field between brick-and- mortar stores, which are regularly complying with their tax obligations, and online market places.
“Whether their business is operated online or through physical stores, sellers and merchants have to pay their taxes,” he 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 said earlier that small-scale online sellers with annual transactions below half a million would be exempted from the creditable withholding tax under Revenue Regulation No. 16-2023 and RMC 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.
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.
