THE Bureau of Internal Revenue (BIR) started the imposition of withholding tax to online sellers/merchants on July 15, 2024 to ensure tax compliance and generate additional revenue from the rapidly growing digital economy.
Commissioner Romeo D. Lumagui Jr. said Tuesday, July 26, that the 90-day extension for the delay of the implementation of Revenue Memorandum Circular 16-2023, which imposes withholding tax to sellers/merchants by electronic marketplace operators, lapsed on July 14.
"No further extensions will be given," Lumagui said.
"The previous extension was given in recognition of the compliance needed with the relative policies or requirements of other government agencies and to give the affected parties an opportunity to adjust with the provisions of Revenue Regulation No. 16- 2023 prior to the actual imposition of the Withholding Tax," he added.
Under the new policy, online platforms and marketplaces are required to withhold a 1.0 percent tax on all transactions conducted by sellers using their platforms.
The policy applies to all online transactions, including the sale of goods, services, and digital products.
"Withholding tax is a system of taxation where taxes are collected at source and will be credited against the total income tax liability of the sellers/merchants," said Lumagui.
"The BIR aims 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 added.
Not covered by the policy are online sellers with annual total gross remittances that have not exceeded P500,000 for the past taxable year and "if the cumulative gross remittances to an online seller in a taxable year has not yet exceeded P500,000."
Gross remittances refers to the total amount received by an e-marketplace operator or digital financial services provider from a buyer or consumer for the goods and services sold by or paid to the seller or merchant through the platform of the e-marketplace operator.
Digital financial services providers are given until October 12, 2024, to complete their respective system adjustments to comply with the policy. (TPM/SunStar Philippines)